US Lenders have begun offering a half-century home loan as incentive in face of record-high home prices, rising interest rates. As home prices and interest rates keep rising, lenders have figured out a way to keep the dream alive for millions of people who want to own their own home. It's called the 50-year mortgage.
According to a report Wednesday in USA Today, a handful of small lenders have begun offering 50-year adjustable-rate loans to buyers who need to keep payments low in the current economic environment. Most US banks already offer 40-year mortgages, which account for about 5 percent of all home loans, the report said.
"One of the biggest things in California is the high costs of homes. With rates going up, there's demand from customers (for) longer loans," Alex Diaz Jr., with Statewide Bancorp in Rancho Cucamonga, Calif., was quoted in the report as saying.
Statewide, which introduced its 50-year loan in March, has already received about 220 applications, Diaz said, according to the report. The 50-year mortgage also signals that the cooling real estate market is heating up competition among lenders, the newspaper said.
I just did a calculation on a $300,000 mortgage, 50 year term, 7%
monthly repayments = $1805
interest component = $1750
Annual Principal Reduction = $660
Compare repayments to a 25 year term
monthly repayments = $2120
The 50 year mortgage is practically speaking an interest only loan.
Advertising of home loans. Personally I like how the US mortgage providers advertise home loans. They neither focus on nor do they mention the interest rate.
"$145,000 mortgage for under $485/month! Think you pay too much on your mortgage?"
They sell mortgage loans just like car loans. Shift the focus to the monthly payment not the rate. That actually makes sense.
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