is a 50 year loan the answer?

I have had several chats with lenders, fellow REALTORS and obviously clients concerning the newly proposed 50 year mortgage. 

    Based on conversations, it seems as if most may be opposed to the idea. It sounds helpful, until you TRULY RUN THE MATH.


      A slightly lower monthly payment looks tempting in the moment, but stretching a mortgage that long means that a home buyer may be paying much more in interest. In fact, it is estimated, that the payments for the first decade would barely touch the principle balance of a home loan (as most of the monthly payment would be applied towards interest).


      Don't believe me? See Below: 


  
                                                Let’s Look at the REAL NUMBERS  


                                                Purchase Price: $500,000

                                                Down Payment: 5%

                                                Loan Amount: $475,000

                                                Interest Rate: 6%



              30-Year Mortgage

• Payment: ≈ $2,849/month
• Total Interest: ≈ $546,000
• Start killing the debt: Year 5–7

 50-Year Mortgage

• Payment: ≈ $2,580/month
• Total Interest: ≈ $881,000+
• Start killing the debt: Year 15–20

So basically…

You’d pay an EXTRA $335,000…

to save around $269/month.


Let that sink in.