40 Year Mortgages
You say you haven’t heard of the 40 year mortgage? That’s because it tended to be a niche product. The reason is that in the past, the government sponsored lenders Fannie Mae and Freddie Mac wouldn’t buy the loans from lenders. As a result, the loans remained on lenders books tying up funds for a long time.
However, that changed in 2005. That’s when Fannie Mae began buying these loans.
40 Year Mortgages- Still a Tough Sell
The demand for these mortgages has historically been small since so few lenders offered them. But even with more availability, the loans may still be a tough sell.
- The interest rates are usually an eight of a point higher than the 30 year mortgage
- The additional 10 years to the life of the loan doesn’t make that much difference in your monthly payment (for example, on a 40 year, $200,000 loan at 6.25% the monthly payments are only about $64 lower than a 30 year loan at 6.00%)
- Interest only mortgages offer lower monthly payments than 40 year loans
40 year Mortgages- The Market
Still, they may be good for some borrowers. The lower monthly payment could help borrowers on the edge of qualifying. Also, the loan still has the stability of a known monthly payment that will not change over the life of the loan.
Steve Wyrostek -HomeLoans.org Expert A 20 year plus veteran of the insurance industry, Steve managed departments in the personal and commercial lines areas of major insurers. He’s familiar with how insurance—ranging from boat to workers compensation—works.
