Wednesday, April 05, 2006

A Longer Mortgage Life: ‘40 Is The New 30’

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The California Department of Real Estate has a piece in its Spring 2006 bulletin about the new 40-year mortgages being introduced by the California Housing Finance Agency (CalHFA).

It sounds like the loan option has benefits, but then again, it also sounds like what car salesmen sometimes do to dupe a car buyer into spending more money than they have to.

Here's an excerpt from the California Department of Real Estate:
CalHFA has just introduced the 40-year fixed mortgage. It has all the benefits of the agency’s 30-year fixed mortgage product: below-market rates, straightforward paperwork, industry average turnaround and a rate that doesn’t change for the life of the mortgage.

There’s more to benefit first-time homebuyers, especially those who are concerned about the effect of job loss on their new house. If the loan is insured by CalHFA, it includes HomeOpeners®*, a Mortgage Protection Program. This program, offered at no additional cost to the buyer, will cover mortgage payments up to $2,500 for six months if the buyer becomes involuntarily unemployed.

Theresa Parker, CalHFA’s Executive Director, says, “The 40-year fixed mortgage helps people get into their fi rst home. HomeOpeners helps them stay there. We hope Californians use our loans to buy their fi rst home, and then we wish them success as they move up in homeownership and in life.”

If the 40-year fixed mortgage doesn’t suit a homebuyer’s needs, then CalHFA also offers the aforementioned 30-year fixed mortgage, as well as the interest only PLUS loan which includes 5 years of interest only payments, and then a 30-year amortization of principal and interest for a total term of 35 years.

-- The Boy in the Big Housing Bubble/Los Angeles and Beyond