40 Year Mortgages

More about 40 year mortgages if it is right for you.

This is a mortgage that has rate payable for 40 years. Instead of the usual 30 year fixed mortgage payment the loan is extended for an additional of 10 years. This reduces the monthly payment and appeals to home buyers with very small amount of down payment with minimal monthly budget. It's an attractive type of loan for states that have a high housing cost and enable more buyers to buy houses even though they have a lower income.

Fannie Mae has a 40 year type of mortgages. They are :

-40 year mortgage which is fixed rate
-Standard 3/1 also 5/1 and 7/1
-10 hybrid ARMS

Is it the right loan for you, that is the 40 year? Consider these;
Advantages of 40 year mortgages:
-Lower mortgage payment- Because the loan is for 40 years, the loan is stretch out with a resultant lower monthly payment.
-Easier to qualify
-Large loan amount. 40 year mortgages are specially good for people who needs a bigger house or who lives in areas with a high cost of living.

Disadvantages of 40 year mortages:
-Reduce monthly payment is not much. So take out your calculator and compare the 40 year term with the traditional 30 year term.
-Rates are more often 1/4 to 1/2 percent more than 30 year mortgage fixed rate.
-Equity is build up at a very, very slow pace.
-Total loan payment is more, than thirty year mortgage.

If you want to buy a house, which is one of the American dream and a 40 year fixed mortgage is your only option, there are some ways to save in your total loan payment:

- First you can refinance your mortgage in the near future if the interest rates are still lower and you can afford the traditional fifteen or thirty year fixed rate type of mortgages. Bear in mind though that interest rates might go up in the near future.
-Second you can add more to your regular monthly payment if your budget allows or once your get your raise to build more equity.

It is a known fact that for the first few years of your loan you are mostly paying for the interest. When you check your mortgage statement monthly you will see a large portion of it is paid towards the interest.

So weigh your options very carefully if 40 year mortgage is right for you before you make that very important decision. Buying a house is a long time commitment.