For those of you who thought 30-year mortgages were long-term, guess again. Half-century mortgages may soon start making their debut in Texas. Talks of 40 and 50-year mortgages are said to give buyer's options, but at what cost? This is a recent debate topic among real estate professionals and others since the mortgages first started appearing in high-appreciating states such as California.
Realty Times published an article in May regarding 40 and 50-year mortgages. The article outlined the difference in payment among the longer-term mortgages versus 15 and 30-year terms. The gist is that these mortgages allow buyers to have a lower monthly payment, which is similar to the purpose of an ARM (Adjustable Rate Mortgage), but at a fixed rate. Reports show that there are a great deal of owners now losing their homes after their ARMs reach the adjustable period.
While some may see these long-term mortgages as a solution, most agents and mortgage brokers will reiterate the following..."If you cannot afford the payment, do not buy the property". The question is whether we need these types of mortgage products in Texas. Although property taxes are generally higher in Texas than other states, real estate is still affordable. There currently is no real need for 40 and 50-year payment periods since real estate prices are not extremely inflated and interest rates are still affordable.
Residential buyers should beware of these long-term mortgages since the time to build equity will be lengthened. These loans can be especially damaging when the real estate market declines and homeowners have not built enough equity to break even on a sale.
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Dee Copeland, Investment Specialist
AustinHomeNews.com, Team Dee Residential
eRealtyAlliance Commercial Real Estate
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