According to an article on MSN Money, 40-year mortgages are about to become mainstream.
Forty-year mortgages have lower monthly payments than their 30-year cousins, although they cost more over the life of the loan because the borrower pays interest for 10 years longer. With the lower monthly payments, they are seen as a tool to allow people to buy homes that are unaffordable with 30-year mortgages.
The economy seems to be becoming more creative in order to find ways unaffordable houses can pretend to be affordable.
Here are other creative examples I described earlier this year, including interest-only mortgages.
Subscribe
9:59 am (reply)
That’s sad that our societal mentality has become not, “just buy what you can afford” but rather, “find a better way to borrow the money”. I mean, I realize that in many cases there’s just no alternative, but there has to be a stopping point, right? It’s going to get to the point where no one can buy anything without taking on huge amounts of debt that they can never possibly get out of.
12:20 pm (reply)
I wrote about this article the other day, and I totally agree with your sentiment about pretending that unaffordable houses are affordable. This is just a bad, bad idea. At least if people are getting a fixed rate on these 40 year deals it won’t get as ugly for them as it will for the people with short term ARMs once the rates start to climb.
fivecentnickel.com