Home Mortgage Weblog

The realty mortgage industry is abuzz with the news that 50 year mortgages may be launched soon. This is possible as the US government has resumed the sale of 30 year bonds after a gap of nearly five years. As of now, financiers had been basing interest rates on 10 year bonds. The new 30 year bonds will allow mortgagers to offer longer term loans.

Longer term loans imply that the customer has a longer payback period and his monthly outflows will be lower. This means that a customer can borrow a larger amount for the same outflow on a 50 year loan vis a vis a 25 year loan. Experts are of the opinion that these 50 year loans will never last their full term, with customers converting them to 30 year mortgages midcourse.

This basically translates to the fact that if you cannot afford the monthly instalments of a 30 year loan at this point of time, it may be a good idea to take a longer term loan with lower outflows now and to convert it to a 30 year mortgage once your income level rises.

While taking a 40 to 50 year mortgage, customers should bear in mind that the total interest outflows over this period will be much higher as compared to a 25 to 30 year mortgage. Thus one should use this route with caution and plan to reduce the repayment period to a 25 to 30 year mortgage after a few years.