50-Year Mortgage A Viable Alternative.
Written by on Saturday, April 28th, 2007 in General.
Getting a 50-year loan is a perfectly rational way to avoid an interest-only or payment-option adjustable-rate mortgage. Both of these loans feature Adjustable Rate Mortgages (ARMs), but can also feature a negative amortization factor… which if the borrower doesn’t administer or manage properly, can cause problems in the long run.
With an interest-only mortgage, the minimum monthly payment puts little or no money toward principal. And, a payment-option ARM can go a little further… in some circumstances, the minimum monthly payment doesn’t cover the interest accrued that month. A borrower could make a minimum payment at the beginning of the month, and then going into the next month, could find that he now owes more than was owed before the payment. This situation is referred to as negative amortization, or “going negative.” It can be avoided if the borrower pays attention to his mortgage statements, and makes more than the minimum payment. However, some borrowers don’t pay attention and get into trouble.
For borrowers who want to avoid the possibility of going negative, the 50-year mortgage might make sense. It offers lower monthly payments than a traditional 30-year mortgage… like the interest-only or payment-option loan. And, it also offers a predictable and fixed housing payment. Additionally, in areas where housing prices are rising or have risen substantially, the lower payments provided by a 50-year mortgage make a home or property more affordable. Want more information about the 50-year mortgage? Consult your Mortgage Match loan consultant.