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What is a 50 Year Mortgage?

By Martin Harris in Mortgage and Lending
April 10th, 2011

While 50 year and even 100 year mortgages may be the norm in Japan, many Americans are already living under the belief they can eventually “own their home” lock stock and barrel with a 30 year mortgage. A 50 year mortgage is no better than renting because most consumers will never see the term carried out and the posession of the deed to their home in their own hands.

The 50 year mortgage is being offered by certain lenders as an alternative to an interest only or balloon mortgage. However, when you really look at the details it becomes apparent that both types of mortgages are targeting people who prefer to live above their means. In most cases, a 50 year mortgage doesn’t seem to make very much sense in financial terms, at least not for those of us striving towards financial freedom and living debt free.

Jason Flurry, an experienced financial planner and president of Legacy Partners Financial Group in Woodstock, Ga. states, “If you run the amortization out, it basically is an interest-only loan, in all practical terms. If a person is considering something like that, they’re probably trying to squeeze into too much house to begin with.”

While a 50 year mortgage will have lower monthly payments, the total end cost to homeowner is astronomically higher than that of a standard 30 year mortgage because they would be stretching out the payments for two decades longer. It’s impossible to guess how much higher the overall costs would be because the rate moves up and down annually for the last 45 years of the loan.

50 year mortgages are a relatively new mortgage loan and they can make homeownership more affordable but typically require a minimum credit score of 681 to qualify for a loan. Prime candidates for a 50 year mortgage could possibly be professionals who don’t have the current income to qualify for their dream homes but are anticipating significant increases in their earnings in the immediate future.

For the average consumer who isn’t expecting a windfall, a 50 year mortgage can be financial suicide and in my opinion, if you are considering this type of loan, you might want to consider purchasing a more affordable home, one within your current and predicted future earnings.


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