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40 Year Mortgage

40 year mortgage loans have been around for a while but are becoming more common. Many lenders are now offering a fixed rate 40 year mortgage loan. Typically, lenders are making the 40 year mortgage available with a charge of 1% of your mortgage amount. This is a charge to your closing costs and not to your mortgage rate. You can either get the same mortgage rate as on your 30 year term and increase your closing costs or pay a slightly higher rate (usually .25% higher) and I can pay the cost for ou from an increased yield spread premium. The advantage to a 40 year mortgage is the ability to qualify for a larger mortgage without the risk associated with a interest only 40 year mortgage. You have the safety of a fixed rate, no issue of recasting to a higher payment at the end of the interest only period, and qualify for a larger mortgage.

Lets look at some real world examples to see the savings comparing a 30 year and 40 year mortgage term based on a $250,000 mortgage

At 7% a 30 year term gives us a principal and interest payment of $1663.26
At 7% a 40 year mortgage term gives us a principal and interest payment of $1553.58 or a savings of $109.68
A 7% interest only loan gives us an interest payment of $1458.33 or a savings of $204.93 compared to the 30 year term but do not forget that there is some increased risk associated with the higher payment when the interest only period ends.

Another product series using a 40 year mortgage loan term are the popular 40 Year Mortgage Option Arms. These products allow up to 4 different payment options, a minimum payment can be set to either a 30 or 40 year term, an interest only payment, fully amortizing 30 or 15 year terms. When I have a client who wishes to drive the minimum payment down to the lowest possible payment, the 40 year mortgage loan term is an excellent choice and is what I use on both my home and investment property. You will need to pay attention to the amount of deferred interest you are accumulating but the deferred interest can be a wonderful tool in tax planning.

I have developed an Adobe document on this program. Send me an  email requesting a copy of "Understanding the Option Arm".

Read more about 40 Year Mortgage Closing Costs

I have added a website dedicated solely to the Option Arm.

Here is a useful  Option Arm payment calculator

In 2008, Short Sales are where most of the bargains in real estate are. Learn more about Short Sales

I also offer business equipment leasing

I have an article "Buying your home in 2008" by email explaining negotiating strategy in today's market.

If you have had credit issues in the past, it is absolutely critical in today's market that they be addressed before you try to get a loan. I have referred my clients to CreditFX for the past 5 years. Exceptional customer service and I am often stunned at what they have been able to have removed from people's reports, allowing my clients to qualify. Their charge of $199 is one of life's true bargains.

As a Certified Mortgage Planning Specialist, I offer an analysis of your situation today can make suggestions on how small changes in how your debt is structured today can have a life changing effect in the years to come.  Read more about this free, no obligation service.