Does A 40 Year Mortgage Make Financial Sense?

With interest rates nearing fourteen-year highs buyers are looking at all methods to help with lowering the monthly payment so they can buy a particular home.  Buyers mainly consider the monthly payment and how it will fit within their budget.  By spreading out that payment over a longer period the buyer can reduce the monthly payment.  Adding interest into the mix a 40-year mortgage may not be the best financial option for buyers considering the short-term monthly payment savings as this article explores.

Lower Payment?

Certainly a 40-year mortgage can offer a lower payment compared to a 30-year mortgage regardless of interest rate, but how much lower is it really?  Let’s take for example a $400,000 mortgage with a 30-year and 40-year term at a 7% interest rate.  At 30-years a $400,000 mortgage results in a payment (not including tax and insurance) of $2661.21.  At 40-years the mortgage payment is $2485.73 (also not including tax and insurance).  That results in a lower monthly payment for the 40-year mortgage by $175.48.  That is a modest savings in the monthly payment. 

Looking at the overall interest a homeowner will pay though can raise some concern.  The total interest paid for the 30-year mortgage is $558,035 over the life of the loan.  For a 40-year mortgage the total interest paid is $793,148.  The additional interest paid on a 40-year mortgage is $235,113.  If held for the full 30 or 40 years that is quite a bit of extra interest to be paid.  While the ...

Mortgage Scams To Watch Out For

Whether you are looking to buy a home or refinance an existing mortgage it is helpful to be aware of potential scams and pitfalls to avoid.   As with anything involving money too many con artists are willing to put in effort to separate you from your hard earned money.  This article looks at some common mortgage pitfalls and/or scams that could end up costing you more money than it would normally.

Fake Mortgage Lenders

Most mortgage lenders are required to be registered with Nationwide Multistate Licensing System & Registry (NMLS) which keeps a record of all licensed mortgage providers.  The NMLS does not issue or revoke anyone’s mortgage license but keeps track of individuals with mortgage licenses so as they work with different organizations in the industry they are tracked.  In fact lenders can be looked up by their names on the NMLS Consumer site.  With the NMLS Consumer site any information related to the person being looked up is self-reported.  Lenders who have had their licenses revoked by their state for whatever reason will be reported as having a suspended license.  If you have any doubt about a particular lender ask for their NMLS number and look up their information.  With as many legitimate lenders that are out there, if one makes you feel uncomfortable then look for another lender.  No one particular lender is going to have the magic formula to suddenly cut your interest rate in half or prevent you from being foreclosed...