If you\’re like most people, you spent most of your life without thinking about 40-year mortgage loans. But the current economy has changed your plans and 40-year mortgage loans have moved to the front of your awareness. Are they worth it?

On the good side, they spread the payments longer than the more conventional loans, so you get lower monthly payments. Currently, to get smaller, fixed monthly payments than you get with mortgages amortized over 30-years,, you\’d have to get an interest only mortgage, a much riskier loan.

Since the monthly payments are lower, you might qualify for this type of loan when you cannot for a 30-year fixed rate mortgage. This situation would apply to a rather small number of people.

On the other hand, the longer the term of the mortgage, the more interest you pay.

With a 5% interest mortgage loan amortized over 30 years you end up paying $93,255 in interest. With a 5% interest mortgage loan amortized over 40 years you end up paying $131,456 in interest. That\’s $38,200 more. But the 40-year mortgage does save you almost $50 on your monthly payments.

Obviously, the higher the interest rate, the higher the loan amount, the more interest you pay. The price is really high. The difference between the monthly payments for the two types of loans is not that great.

To make a good comparison, you should not only compare the 30-year and the 40-year mortgage loans but your other alternatives too.

For instance, if you rent right now and rents are high and you cannot qualify for a 30-year loan, maybe it makes sense to go for the 40-year one. Or if you\’re already a homeowner with equity in your home but can only afford the payments on a 40-year loan and not accessing the equity would have bad consequences.

Maybe you can refinance later, if your income is higher or the mortgage rate you\’d qualify for would be lower.

Of course, counting on future events is not good practice. They should be a bonus; you should be prepared to accept the loss resulting from 40-year mortgage loans from the start.

So 40-year mortgage loans make sense for a rather small group of people and are pricier than the more conventional 30-year mortgages.

Author Bio: Current mortgage rates are low. If you can get a mortgage, now it\’s a good time to. do it. However, you should be well informed. Visit www.1-currentmortgagerates.com to get information.

Category: Real Estate
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