Lenders are now offering 50-year mortgages for those homeowners who want to be able to afford monthly payments on a house and who don’t mind a slower pace of building equity.
Here’s a quick comparison, using the mortgage calculator at bankrate.com. For a 30-year $500,000 mortgage at a 7% interest rate, monthly payments will run you $3,326.51. Over the life of the mortgage, you will pay $697,544.49 in interest alone! That’s massive enough.
But if you were to spread the same mortgage over 50 long, frustrating years, your total interest paid will be $1,305,065.35. That’s almost twice as much interest, providing some great news for the mortgage company. Meanwhile, the monthly payment would be reduced only to $3,008.44.
On top of this, you may be charged a higher interest rate for the “advantage” of taking a longer time to pay back the mortgage.
Updated January 16, 2010 and originally published May 10, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.