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New 50 year mortgage in - is that a good idea?

Sat Jun 2, 2007 05:06PM | By Tony

See more in Mortgage | Permalink | Email | Comments (1)

While sub prime mortgage market struggles mighty, the lenders are looking for new products to sell to you as well as to their investors. The latest mortgage program is Fully Amortized 50/30, offers lower monthly payments during the first 10 years of the loan life, with payments amortizing over 50 years. After this 10 years, the remaining mortgage balance will start amortizing over remaining 20 years.

So with $200,000 mortgage at 7.00% over 50 years, you pay $1,203.38 per month. Less than $40 goes towards the principal, and after 10 years, you will have a balance of $193,646.01. You start paying this $193,646.01 based on the 20 year amortization. Monthly payment will be $1,501.34 which is less than $300 increase comparing with one of the first 10 years.

Well this is all academic, unless someone finds that house where he or she or they will live forever, but can't afford it with a regular 30 year loan. Hopefully after 10 years, the less than $300 increase in monthly mortgage payments will not bother too much.

Comments

As with the 40 year mortgage; this loan is very bad for a buyer. Prices are falling and will continue to fall for years. These types of loans benefit only the seller and mortgage broker.

Can't afford to make a down payment? Rent, save up your money and then by the time you really are ready to buy, the prices will be within your reach.

Posted by: LIBubble | June 27, 2007 07:09 PM

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