40-Year Home Loan Soaring in Popularity (KRT)—With little improvement expected this year in housing affordability, mortgage bankers are predicting a surge in 40-year mortgages, which are becoming increasingly popular because of their lower monthly payments. The California Association of Mortgage Brokers, in an annual forecast released, also expects the interest rates to hit 7% in 2006. Affordability will continue to be a critical issue for the state, even though prices are expected to stabilize.
“It is alarming that the housing affordability crisis will continue, making it difficult for first-time buyers to qualify for adequate financing,” says association President John Marcell.
A survey of association members found that 60% believe 40-year fixed-rate loans will become more economical for home buyers next year. A loan of this duration will generally lower the monthly payment by several hundred dollars, depending on the home price, says Marcell, who is also president of Better Mortgage Brokers Inc. in Upland, California.
Robert Kleinhenz, deputy chief economist at the California Association of Realtors, says not every lender offers a 40-year mortgage.
“It certainly is another avenue lenders can go down to enable households to be able to afford homes at the kind of prices we’ve been seeing in the last few years,” Kleinhenz says.
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