Introducing the 50 year Mortgage in California

Caron

The California Mortgage Industry has come up with a new product which can help consumers avoid popular mortgages like interest-only and option adjustable rate mortgages (ARMs). It's the 50 year mortgage making its debut in South California's San Bernardino County towards the end of this March.

As stated by industry experts, the 50 year loan has created two kinds of market – one for the homebuyers opting for it to cope up with the rising home prices. The other market comprises of borrowers willing to get rid off their Option ARMs which creates negative amortization on account of minimum monthly payments. Currently the 50 year mortgage is a 5/1 year hybrid with an initial interest rate that continues for 5 years. After the initial period, the rate is adjusted annually with respect to the London Interbank Offered Rate or LIBOR.

Industry Regulators and consumers expect foreclosures to surge in the coming years especially for those paying for interest-only mortgage and option ARMs. With an interest-only loan, the minimum monthly payment includes only the interest and not the principal. But with an option ARM, the minimum payment doesn't even cover the interest accrued that month. Therefore, you owe much more than you owed before the first payment. This is why industry experts believe that refinancing into a 50 year home loan is a better way to get out of such negatively amortized loans.

But a 50 year mortgage isn't always the best option. Your monthly payment is low compared to a 30 year mortgage, but the overall interest payment is much higher. This is because you are extending the loan period within which there can be several ups and downs in interest rates.

However, there are differences in opinions among financial experts. Some are of the opinion that a large section of homebuyers may not go for 50 years home loans, as they don't prefer occupying the same property even for 30 years. Such homebuyers are comfortable with low rate hybrid ARMs which will allow them to move out within 5 years. But other experts point out that 50 year mortgage will attract attention as borrowers these days are willing to experiment as the industry introduces more and more innovative products.

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blue · Posted: Sat Apr 29, 2006 10:14 am Post subject:

Only time will speak out whether this will become a popular product or not. It's true that many don't like to have a mortgage or a house for so long but on the other hand it can be a good option for a new home buyer who has just started his carrier and may be not in a position to afford higher payment.

Guest

May be it will come up as a good option to change from the traditional existing ones. But the extra 20 years payment than a traditional 30 year puts me in doubt.

Guest

The monthly payment will definitely be lower than the other fixed type mortgages and it will be a favorable option to change from the interest only and payment option adjustable mortgage.

But at the same time when you think of the extra years that you need to pay for the loan, I am unable to make a guess how much extra will it go. Need to check how the market takes it.

helping_user · Posted: Wed May 10, 2006 9:02 pm Post subject:

I think before going for 50 year mortgage the borrower should understand the product. There are 2 main issues; they need to keep in mind:

In 50 year mortgage, the borrower builds the equity very slowly.

The monthly payments could rise as the rates on the loan are adjustable.

I think the 50-year mortgage is best for the borrowers plan to stay in their home for about 5 years. Since the rate remain fixed for first 5 years.

Guest

What Wholesale Lender is buying the 50-year mortgage?

Guest

I think there are a very few of them who has already involved them in 50-year mortgage product. The market is still being looked at on the inclination of borrowers towards this loan.

Guest

Some lenders in California have started introducing this product which can be a rational way to avoid an interest-only loan or an adjustable rate mortgage loan.

But it has not become very popular and till now it is more under an experiment it seems on how the market responds.

helping_user · Posted: Wed May 17, 2006 8:53 pm Post subject: lender offering 50 year mortgage

Statewide Bancorp is the only lender offering 50 year mortgage outside California. The main thing is that the lender isn't licensed to offer these loans.

Source: kfvs12.com

Guest

Would it not be a good idea to get a 50 year loan to keep the payments low and make to extra payments every year towards the principle and after five or ten years refiance for say a 30 year fixed loan?

helping_user · Posted: Sun Jun 04, 2006 8:16 pm Post subject:

Hi

I think it will be a good idea if you refinance after staying 5 years. But refinance the loan after stay more than 5 years is not a good option.

Thanks

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