The 40-year mortgage has become popular today. This is unlike years before when homebuyers would usually go for the 30-year fixed mortgage or one of those adjustable rate mortgages (ARM). If you are a first-time home buyer, you may not be so acquainted with mortgages and may wonder if the 40-year mortgage would be right for you.
What is a 40-Year Mortgage?
According to City Creek Mortgages, a 40-year mortgage is a fixed type of mortgage that you’ll have to repay in a period of 40 years. This means the interest rate and the amount you would be amortizing would be the same throughout the entire period. But while the payment will remain the same every month, the breakdown on how much goes to interest payment and to the principal will shift during the loan period.
Advantages of a 40-Year Mortgage
The main advantage of a 40-year mortgage would be in the lower monthly payments. This becomes possible since repayment period would be stretched to a longer period of time. So the monthly amortization would be considerably lower than that of a 15-year or 30-year mortgages. This would be ideal for those who may only be able to pay the minimum amount possible.
Going for a 40-year mortgage would also be a good idea if you are planning to purchase a more expensive home. The monthly payment may become more manageable since it would be stretched for a longer period. This may be a good move if you are just starting a career and desire to live in a more expensive house. You can always have it refinanced when your financial position improves later on.
Drawbacks of the 40-Year Mortgage
While you may be paying lesser, there are also disadvantages. A longer term would mean you will be paying more in interest and the buildup of your equity would be considerably slower. And most probably you will be paying a higher interest rate compared to the other types of mortgages.
With its advantage and disadvantages, you may have a hard time deciding on whether to take this type of mortgage or not. It would be best to talk to a mortgage company in St. George and learn more about this. Should you decide to proceed, they may be in the best position to help you not just in the processing but also in finding the best interest rate and conditions for your mortgage.