Diane's Diary-ah

50 Year Mortgages, Yikes!

Written by: Diane St James
Copyright 2007 

When surfing the Internet last evening, I was looking around at
the going mortgage interest rates to see how the 15 year rates
were doing. 

I couldn't help but notice the links for 40 and even 50 year
mortgages that were listed on one site I visited.  50 year
mortgages, yikes! I realize that times are tough and some folks
are having difficulties making their mortgage payments, especially
those with adjustable rate mortgages that just went up by 2% or
even more. But the topic of this article isn't that, nor the
ever increasing foreclosure rate. 

It is about a new mortgage tool that has been created under
the guise of helping out borrowers.  Why a guise you ask?
Well what mortgage lender isn't happy to take another 20 years
worth of interest payments from you?

If you are considering a 50 year mortgage, it is not smart
thinking for anyone who ever wants to retire and spend their
golden years free from the claws of their monthly mortgage payment!
Oh sure, everyone is living longer these days.  Why not a 50 year
mortgage if you're going to live to be 100 anyway?

I'll tell you why not! Folks need to be able to enjoy retirement
with limited monthly expenses.  Sure if you own your home free
and clear, you have to pay real estate taxes and homeowners
insurance. But, at least you won't have that payment that for
some of us is nearly half of our monthly income in some
cases - thanks to the evolution of automated underwriting. Let's
not go there though as that is another sore subject to me.

There is something key about 50 year mortgages you may not
know about. Getting a 50 year mortgage may not change
your payments all that much. Did you know if you get a $150,000
mortgage for 30 years at say 6.5%, the payment is $948/month.
The same mortgage for 50 years at 7.0% (hey the rate is always
going to be higher the longer term you have), the payment is
$905/month.  That is a savings of $45.00/month! That is all!
Not much for adding 20 years to your loan is it? Cutting out
that coffee stop every other day on the way to work would
more than make up that amount!

If you have a 50 year mortgage, chances are you may not keep
it all 50 years, but your principal balance will be higher than
it would otherwise be when you do sell or refinance it.
If you DO keep it all 50 years, you'll have paid 20 more years
of interest and probably work 20 more years than you want to.
Doesn't it get tiring working just to pay the bills?  Unless your
income level far exceeds your taste in homes, chances are you
live like many Americans, with very little left to put in
savings to show for all the hard earned money.

My viewpoint on all this is exactly why I was looking at the 15
year mortgage rates.  I just celebrated, albiet quietly, my 50th
birthday and would really like to at least have the option of
retiring when I'm 65. If I refinance my mortgage now to a 15
year mortgage I will own my home free and clear in 15 years.
Granted the 15 year payment is higher, but if I just cut out
those weekend dinners out and tell my kids no to the newest,
latest fashions, I will have enough to make up the difference.
Then instead of a flickering match, there will be that light
at the end of the tunnel to look forward to in 15 short years!

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Diane St James is a full-time work at home mom who wears
many hats and is involved in many things.
Visit her website: http://www.dianestjames.com
Mortgage consulting: http://www.abcmortgage.net