Why Should I Choose A 40 Year Mortgage?
The 40 year mortgage has huge benefits for the average borrower. In a conventional 30 year mortgage plan, most borrowers were not able to opt for their dream home, due to the substantial monthly installments that they had to pay. The latter, was simply a loss for both the financial institutions and the borrower. Now, with the introduction of the 40 year mortgage scheme, you have the option of paying lower monthly installments for your mortgage, due to the extra 10 year term that you are going to get from this scheme. In other words, the mortgage payments will be spread throughout those extra years, and that will obviously decrease your monthly cost. You can see that effect illustrated through the diagram which shows the decrease in monthly payments as the mortgage period increases.
This extra 10 year term will help you, as a borrower, by bringing down your monthly installments considerably. Now, you could opt for that dream home that you have been aspiring to buy. Then again, sometimes, it’s also possible that you will have to compromise for a smaller home, even if it’s only temporary, until you are at a more stable financial state. You will find that the most important variables which determine the price of a house are its size and the area in which the house is located. Depending on your needs, you can find the perfect balance between those two, and then opt for a 40 year mortgage and start living in your new home. This mortgage basically opens the doors to buyers who didn’t use to think that a new house is a possibility given their limited available funds.
Another problem that comes up when you apply for a home loan is that of the “debt to income ratio”. Getting a home loan is not as easy as it used to be previously. Financial institutions are going to check your credit history and if they find that you have a high debt to income ratio, which means that your debt in the market is way above you credit capabilities, then your application for a home loan will get rejected. The 40 year mortgage lowers the debt to income ratio, by dividing the monthly installments that you have to pay by the 40 year term, and chances are that your application for a 40 year mortgage might be approved even with the same credit that got rejected for a 30 year mortgage.
Those are only a few of the reasons why I feel that you should opt for a 40 year mortgage. Nevertheless, at the end of the day, it all comes down to this – You now have the opportunity to become the proud owner of your dream home. With lower payment schemes and ease of approval, this 40 year mortgage is surely a borrower’s delight.
By the way, here is the link to a discounted Wall Street Journal Subscription for all of you who emailed me about it.
