Leave the mortgage to your kids!
If the recent announcement that CHMC and FirstLine Mortgage are now offering a 30 year mortgage is not enough, Genworth Financial has now announced the 35 year mortgage.
Genworth says that the mortgages are aimed at buyers who find it difficult to make the payments needed to secure a home given the hot real estate market. By extending amortization periods, purchasers who could not afford a home based on a 25 year amortization period are now able to enter the market.
While the eligibility requirements are the same as mortgages having the standard 25 year amortization periods, there is an additional insurance premium of 0.20% for 30 years amortizations and 0.40% for 35 year amortization periods.
In my previous article announcing the introduction of the 30 year mortgage, (longer amortization periods), I used the example of a $200,000 mortgage with a 25 year amortization period and an interest rate of 5.50% having a monthly mortgage payment of $1,221. Now with the announcement of a 35 year amortization period, that same mortgage would have monthly mortgage payments of $1,066, a savings on monthly payments of $155.
Sound good? Here’s the catch, extending the mortgage from 25 years to 35 years will cost you $81,453 more. Ouch!! I've said it before and I'll say it again, take the shortest amortization period you can handle.
While I’m not the first to say it, I’ll suggest to you that these recent announcements extending amortizations periods is nothing more than a convenient way that the financial institutions are using to stretch the current real estate boom. A boom which appears to be running out of steam.
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