Will you really ever own your home if you take out a 50 year mortgage or are you on a long-term rent to own basis with the lender? And most banks don’t offer this type of loan; you’ll only find it while utilizing a mortgage broker. Simply stated this type of a mortgage is a sinking ship waiting to happen.
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Sure the payments are lower and you’ll get a fixed interest rate but you’ll build up equity much slower and pay a tremendous amount of interest to the lender. Still, these loans continue to thrive because home buyers are able to get bigger homes while the loan payments are reasonable. Isn’t that always the case; champagne wishes on beer budgets?
Most of us cannot even wrap our reasoning around such a notion. You are trying to buy a home that will take 40, 50 or 60 years to have a clear title but the house will probably out live you. There you go – you’re renting to own!
When you begin paying your mortgage payments, the majority is applied to interest, then escrow responsibilities then the principal. With this 40-50-60 Year mortgage loan you’ll be paying mostly interest payments for years thus the question, is this loan just a replacement for the troublesome interest-only loans. Yes you will accumulate some equity but how much and is it worth paying a higher interest rate that you’ll keep giving to long after retirement age?
And yet, just like the interest-only mortgage loans, homebuyers are willing to risk it all and take on a 40- 50-60 year mortgage. If you need to apply for a 50 year mortgage loan to stretch out high payments you’re probably buying much more than you can really afford. The responsible thing to do is look for a smaller home that accommodates your needs but remains within your budget. And you’d be surprised to find the same home with the same number of bedrooms, bathrooms and dining space is waiting for you across town. Perhaps not as fabulous or eccentric as the one you’ve had your eye on but a little shopping around will really benefit you where this newfound disaster of a mortgage loan can’t.
With that said – while the average consumer cannot benefit from this type of lengthy loan, real estate investors with no intention of keeping the property might take a second look. Low payments and fixed interest rates solve the problems of many cash-strapped investors.
