40 Year Fixed Mortgage Offers Lower Monthly Payments

2007-03-08 10:33:40

( Financial )



A 40 year fixed mortgage has a fixed interest rate, and a loan period that lasts forty years. 40 year fixed mortgage is a new product which has become popular in certain areas where housing affordability has declined.

Fixed mortgages represent a large portion of the overall mortgage market. Their structures are easy to understand, and the monthly payments are predictable. Your repayment calendar in a 40 year fixed mortgage is distributed over a forty-year period. This results to a lesser monthly payment than on a 25 year fixed rate mortgage.

Among the fixed mortgages in the market today, many financial experts consider 40 year fixed mortgage as one of the lowest fixed rate mortgage products. You may find 40 year fixed mortgage right for you if you are a first time home buyer living in an area where the real estate prices are soaring high.

One primary benefit of a 40 year fixed mortgage is its security against risks of a sudden increase in the rates. Your lender assumes the risk of interest rate fluctuations. But you have to remember that the longer the term of the mortgage, the higher the interest rate. For these reasons, rates on 40 year fixed mortgage are higher than 25 year fixed rate mortgage and 30 year fixed mortgage rates.

If you plan to take out a 40 year fixed mortgage, be reminded that your equity accumulates at a slow pace. And if you eventually wish to refinance your mortgage or move to a new home, it will take some years before you can qualify for refinancing or you can recover your initial costs.

Not all lenders offer the 40 year fixed mortgage product. And if they do, they don’t structure the mortgage loan in the same way. Find time to shop around to avail the lowest fixed rate mortgage package for your needs.


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