Aneka Info

Owning a home during the last three years as a decline in the gold mine. Values ​​are only gone up, up and away.

If you are a homeowner you just can not stop smiling. size of your home equity can be matched only the latest Power Ball total. But what is the first time home buyers or those who have a burning need for more space - to move the customer

Payroll gains have not matched the increased real estate prices, and this is placing new customers in a tight spot. The law of market forces shows that fewer people will be able to buy a home will be less demand and house prices will start coming down, is not it? Wrong!

the construction industry and the booming growth of home equity were the only things driving the fragile U.S. economy. The government must keep the housing market is healthy or risk being booted out of office. Bush keeps the ball rolling as Clinton did before him. Keep passive voters in their new homes decent.

Enter the mortgage 40 years.

ad the financial part of the city's major newspapers exclaimed: "Ask about our 40 Year SmartChoice mortgage!" ad is going to let you have your choice of adjustable rate of 1%, or a fixed interest rate of 1.75% for 5 years.

See what it means. You can walk and borrow $ 400,000 for a monthly payment of only $ 1,012 with zero closing costs! Hurray, everyone can still afford to buy houses. Yeow, this ad even says it will loan 107% of your new home value.

Should not we get a little nervous when we see that the types of ads? 40 years the loan will not allow people who really can not afford a home to shoulder the financial burden? And if we can be a real estate bubble, as some argue, do not buy highly leveraged properties down right dangerous?

So far, forty years mortgages are rare because lenders could not sell the darn things to investors through the government-sponsored enterprises Fannie Mae and Freddie Mac. Those 40 years loans are to be held by creditors, tying your money for a long time. Now that has changed.

and Fannie and Freddie are passing out cash to those babies like running your own money printing presses. Wait a minute, the government is running presses. Some will say, just like Parker Brothers prints Monopoly money.

It is easy to see that the main advantage of 40-year fixed-rate mortgage is that monthly loan payments more affordable and avoid the risk of adjustable rate mortgages. 40-year fixed rate also appeals to buyers with small down payments.

Now stop and look at the numbers. You will see that the difference in payments can not be that significant. Take a $ 200,000 mortgage for 30 years at a fixed rate of 5.75%. That would be a monthly payment of $ 1,167.15. Stretching the loan term an additional 10 years (40-year mortgage) only reduces the monthly payment of just over $ 100 to $ 1,065.78.

There's more: Some of the benefits of those lower monthly payments is offset by a higher interest rate that comes with a 40-year loan. Rates on 40-year fixed are often one-quarter to half a percentage point more than the traditional 30-year fixed-rate mortgages. Loans with longer terms carry higher rates because of the added time frame where a default may occur and because lenders demand compensation when their money is locked for a long time.

One advantage of the recent increase in home values ​​that the house has turned much of their capital in cash through refinancing. Home to spend the money and that money keeps our economy going. With the 40-year loans to real estate equity is growing at a snail's pace of home value appreciates at a normal rate of 3% to 5% per annum. For the first time home buyer who intends to eventually move up to bigger houses, the slowness of capital accumulation is a liability.

Now add a zero closing costs into the mix. In most areas, the closure will run about $ 2,000 in fees for refinancing a mortgage $ 200,000. Estimate - $ 300. The fee for the settlement - $ 300. County recording fee - $ 400. Underwriting fees - $ 300. Processing fee - $ 200. Title Insurance - $ 750. The list goes on.

Without a zero closing cost program, the home buyer will have to wait until interest rates reached a level low enough to justify the closing costs. Keep in mind that closing costs must be low enough to allow the buyer to recoup these costs within a reasonable time. If he plans to be at home for five years and it takes seven years to recapture the costs of closure to a bad deal. We have to admit I do not see the house to be very concerned about such things.

No body gets something for nothing, especially with mortgage lenders. zero cost loan program is financed by a loan with a slightly higher interest rate. You can manipulate the numbers all you want, but always the borrower pays the lender and still makes money.

40-year mortgage will allow our economy to keep rumbling along this bumpy road for at least a short trip. Let's hope we do not wind up at an impasse.