Posted on: 29th Mar, 2010 01:25 pm
What are the arguements for just increasing the length of mortgages say 40 or 50 year instead of 30year to help people stay in their homes
Because in reality it won't make enough of a difference. Once you go out long enough, the incremental term increases don't mean a whole lot.
Typically, longer terms equate to higher rates as well. The current 40 year rates aren't very attractive. Wells Fargo isn't even publishing a 40 year rate right now.
Here's some math. Let's say that you need to add 0.25% to the rate for an extra 10 year term (I'm being generous, you'd probably need to add more). Here's a comparison of payments on a $300,000 loan.
Loan Amount Term Rate Payment Savings
$300,000.00 360 5.500% ($1,703.37)
$300,000.00 480 5.750% ($1,598.66) $104.70
$300,000.00 600 6.000% ($1,579.21) $19.45
Saving $104.70 per month isn't enough to really change the affordability for someone who has a $300,000 loan.
Typically, longer terms equate to higher rates as well. The current 40 year rates aren't very attractive. Wells Fargo isn't even publishing a 40 year rate right now.
Here's some math. Let's say that you need to add 0.25% to the rate for an extra 10 year term (I'm being generous, you'd probably need to add more). Here's a comparison of payments on a $300,000 loan.
Loan Amount Term Rate Payment Savings
$300,000.00 360 5.500% ($1,703.37)
$300,000.00 480 5.750% ($1,598.66) $104.70
$300,000.00 600 6.000% ($1,579.21) $19.45
Saving $104.70 per month isn't enough to really change the affordability for someone who has a $300,000 loan.
i'm so pleased to know someone in Wasilla, AK has some good financial advice for the rest of us.
sorry, Howard...just not a fan of your well-known politician...but i'm liking what you bring to the table.
sorry, Howard...just not a fan of your well-known politician...but i'm liking what you bring to the table.
