A few short years ago, the idea of a 40-year mortgage was shocking to many people. For decades, 30 year mortgages were the most common, and the idea that you could spread out your payments over forty years was almost too hard to understand. Now there's a new 50-year mortgage, and if the 40-year mortgage shook up the financial world, the 50-year mortgage has many people dumbfounded.
But is it really a good idea to get a loan for 50 years? Well, a 50-year mortgage does have a few good points. The most obvious benefit is that it lets a homeowner spread out the cost of buying a home over a longer period of time and pay less each month on their mortgage. In housing markets where prices have gone through the roof, this can be a big plus because it may allow people to buy homes who otherwise wouldn't have been able to.
Of course, there are also a lot of bad things to think about. When thinking about a 50-year mortgage, it's very important to think about how old you are when you buy the house. For instance, let's say you're 30 when you buy the house. With a 50-year mortgage, you wouldn't pay off your home until you're 80 years old. This might not be a bad choice if you think you'll still be able to make your monthly mortgage payments long after most people have retired. On the other hand, if you want to be debt-free when you retire, you should think about a different option.
Also, it's important to remember that the longer you take to pay off your home, the more interest you'll pay. This is why many people who don't like the 50-year mortgage call them "interest-only loans." When you look at the numbers, you'll see that this type of mortgage costs you a lot more in interest than any other type of home loan, even a 40-year mortgage. You might be able to use that money for something else, especially if you're saving for retirement. With a 30-year mortgage and the current interest rate, the monthly payments on a $300,000 home would be around $1,800 per month. On the other hand, if you had a 50-year mortgage with the same interest rate, you could save about $200 per month on your mortgage payment. Since the 50-year mortgage takes 20 years longer to pay off than the 30-year mortgage, you'll end up paying more than $300,000 more for the home over the course of the 50-year mortgage than you would with the 30-year mortgage. If you chose the 30-year mortgage with the $200-a-month higher payment, you would spend $72,000 over the next 30 years, but you would own your home outright. With a 50-year mortgage, that $1,600-a-month house payment will still be your responsibility for the next 20 years.
