Is extending a mortgage to a 40-year term a good deal?
Extending a mortgage’s amortization period from 30 to 40 years offers minimal benefits to the borrower, according to Bankrate.com. That additional 10 years does little to decrease the monthly payments because the interest rate and fees are typically higher for the longer-term loan. Lenders often consider added risks in the 40-year mortgage and price the mortgage accordingly. Of course, the longer loan term could result in significantly higher total interest payments. The difference between a $100,000, 30-year loan at 5 percent and a $100,000, 40-year loan at 5.25 percent would amount to $46,560 in additional interest expense. The saving on monthly payments would be only $37, the report noted. A 40-year mortgage makes sense in some situations, especially when a borrower is only marginally qualified for a mortgage needed to finance the purchase of a home. The small reduction in monthly payments might make the difference in the qualifying process. To find out more about national real esta
