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Bad Debt Loans -A Four-Step Programme to Eliminate Debts.
Mr. Henderson would often think of times when he had a good
credit history and there would be a long line of loan providers
desirous of offering debt consolidation loans. Things took a
sharp turn after he underwent a few defaults and CCJs. This...
Guide to Home Improvement Loans
Here is a useful guide to Home Improvement Loans. What is a Home Improvement Loan? Basically, a Home Improvement Loan is a loan to be used for home improvement purposes. Home Improvement Loans are secured on your property and can be used by...
Home Loans- a Fillip to Your Desire to Rise on Property Ladder
When Mr. Wilson, your colleague at office, shifted to the posh London locality, you were taken for a shock. How could Mr. Wilson manage to buy a home with his paltry income when you still had to make do in your two-room apartment? You are not...
Secured loans for homeowners: because home provides more than living space
Secured loans for homeowners are also called mortgages. They are loans that are backed by a collateral. A Secured loan for Home Owners is offered against the guarantee of your home or any concrete property. It enables you to get loans according to...
Secured personal loans - single solution for all your financial ills
The general opinion of people about secured personal loans has
undergone a sea change. They are no longer considered as evil as
in the yesteryears. They have become as much a part and parcel
of the present day's individual as some of the...
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40-Year Mortgages: An Alternative to Interest-only Loans?
Interest-only loans are quickly becoming a mainstream loan product. Borrowers who were initially turned-off by the perceived risk associated with an “interest-only” loan are now starting to see the benefits: Lower payments, less money tied up in equity, more flexibility, etc.
For the savvy borrower, an “interest-only” loan can be an important component to an overall financial plan -- allowing them to divert principal payments to other financial goals.
“Interest-only” is typically an option only available on adjustable rate mortgages (although some lenders are now offering this option on 30-Year Fixed Loans). Borrowers who plan on keeping the loan for a long period of time and are uncomfortable with a loan product that has an adjustable rate component, may be interested in the 40-Year Fixed Rate Mortgage.
(Note: Some lenders do offer a 40-Year term on their adjustable rate mortgages)
The more flexible underwriting guidelines of a 40-Year mortgage may also attract some borrowers who are interested but do not qualify for an interest-only loan.
A 40-Year Mortgage is exactly as it sounds – a mortgage that is re-paid over a 40-year term. Due to a longer repayment period, 10 years more than the standard 30-Year Mortgage, the monthly payments are lower.
Until recently, these loans were difficult to find. Fannie Mae has
now announced they will begin purchasing these loans from lenders which should increase their availability.
Let’s look at the numbers:
For a $250,000 loan with a fixed interest rate of 5.75% and a term of 30 years, the monthly payments would be $1,458.93; but a borrower could save $83.40 a month by taking out a Fixed 40-year mortgage. Even at a higher interest rate of 6.00%, the monthly payments would be just $1,375.53.
The monthly savings comes with an increase in overall interest:
If a borrower were to keep the Fixed 40-Year Mortgage for the entire term and make the minimum monthly payments, they would pay approximately $135,000 more in interest.
40-Year Mortgages may be attractive to those borrowers uncomfortable with adjustable rate periods or who have difficulty qualifying under the stricter guidelines of an interest-only loan, however, it is important to understand the impact a 40-Year term will have on the overall cost of your loan.
As always, it’s best to consult with your trusted loan professional. They can help you understand your options and determine which loan product is best for you.
About the Author
Chris Rocks is a successful Mortgage Consultant and writer based out of Chicago, IL.
Website URL: http://www.loansbyrocks.com
Contact Email Address: chris@loansbyrocks.com
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