DECEMBER 12TH, 2018

40-Year Fixed Mortgages (FRMs)

Although Fixed-Rate Mortgages are available for 40, 30, 25, 20, 15 and 10 years, this documentation will focus on details for a 40-Year Fixed-Rate Mortgage (FRM). Obtaining a 40-Year Fixed Mortgage is a fantastic way to keep monthly payments low, while also being able to obtain your dream home. This means a 40-Year mortgage allows affordability for a more expensive home. A longer term mortgage can be quite useful with ever-increasing home values allowing one to stretch-out payments longer and enabling one to obtain the house of their desire. It is more affordable without the risk of an ARM. This type loan is appealing to buyers with small down payments and for buyers in expensive or high-priced areas. Consumers should strive to get a fixed rate loan locked-in while interest rates are low so they will benefit with a great rate for the entire life of the loan. In basic terminology, “40-Year” refers to the term of the mortgage and therefore, the payments would be spread out over forty years.

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About 40-Year Fixed Rate Mortgages

What Other Type of Loan Options Are Available Should the Consumer Need a Lower Monthly Payment?

Interest Only – This option provides one to spend the beginning portion of the payment term (the length is stipulated in the contract), paying the interest on the loan. Next, one could begin to pay off principal, pay the total balance, or refinance. Perfect product if one plans to refinance after a short period. Product is not useful for building equity nor is it a good choice for those with fixed incomes who may not be able to make higher payments after the interest only period.

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Adjustable Rates – Riskier than Fixed Rate Mortgages, one would pay interest rates as the market fluctuates instead of a fixed interest rate. This option is fine as long as interest rates drop during the mortgage, but should the rates rise, you could eventually pay more that you would with a fixed rate. An ARM could end up being a benefit if you can tailor it to work towards your specific needs. One may also be interested in an ARM if they need the first year of payments to be lower than future years. If remodeling is in the picture, this loan option could free up cash needed for such improvements. One should always remember the ARM risk factor as your second year could have quite higher interest rates compared to the first year, IF the market goes upward.

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