Size Matters: How Long Is Your Loan?
A year or so after Fannie Mae introduced the 40-year mortgage, an obscure bank in California has upped the ante with a, get this, 50-year mortgage. Statewide Bancorp of Rancho Cucamonga began offering the loan back in March and has received “quite a few applications.” The bank is touting the 50-year loan, which adjusts after…
A year or so after Fannie Mae introduced the 40-year mortgage, an obscure bank in California has upped the ante with a, get this, 50-year mortgage. Statewide Bancorp of Rancho Cucamonga began offering the loan back in March and has received “quite a few applications.” The bank is touting the 50-year loan, which adjusts after an initial 5-year fixed period, as an alternative to ARMs and interest-only loans. Not surprisingly, some people are skeptical. “If a person is considering something like that, they’re probably trying to squeeze into too much house to begin with,” says Jason Flurry, president of Legacy Partners Financial Group in Georgia.
50-Year Mortgage Debuts in Cali [Bankrate]
Homeowners won’t be keeping their mortgages for 7 years on average if they can’t sell.
Yes, these longterm mortgages are a scam and a harbinger of the bursting of the bubble, a last attempt mine the bottom of the buyer pool for the greatest fools.
Re: Homeowners keep their mortgages for 7 years on average…Over what time period was that statistic determined? More specifically, does it take into account the refi boom over the last few years?
“…alternative to ARMs…” ?? No.
09:38 AM,
” ‘squeeze into too much house’–a counterintuitive image.”
LOL
There was a story in the Times a few months back about a homeowner outside of Tokyo who had bought his small apartment in the far suburbs at the height of the boom with one of these type of mortgages. Unfortunately, the market fell so drastically, and he had so little equity, that he now had no option but to remain there and keep paying his mortgage. He couldn’t sell, since the price he would get would be far less than the mortgage he owed. No one wanted to buy those apartments anyway since they were so far away. Perhaps in the US the homeowner would just default on the mortgage, but that didn’t seem to be an option for him (if my hazy memory serves correct after all this time).
10:01 here – Stacey, my parents recently mentioned that to me. I was also wondering how those work. I feel like the bank would own the home at the end of it, which is fine if you start doing one of those late enough in life that it gives you money to live on. I guess that would just increase the size of the mortgage if you died before the bank owned the house, and then it would go to the estate? Does anyone know?
10:01 and Cobblestoner: Where my mother lives in Florida a lot of seniors are doing reverse mortgages where they dont pay back until they sell or pass away. Im not sure if the estate is required to sell the property and pay the amount back or if the property is deeded to the mortgage company and they get to sell for any price they wish.
The bank knows that the average length of time someone holds a mortgage is 7 years. They don’t intend for anyone to hold these mortgages for the full 50 yrs. Plus, the rate adjusts after 5 so many may refinance into something fixed at that time if they decide to stay.
@10:01 you have to wonder if your credit rating gets affected by your age. I guarantee the bank realizes the reason you’re taking the loan out for 50 years is because you won’t be around to pay it off.