Who Offers 40 Year Mortgages

What Loans Do Home Buyers Choose

Across the United States 88% of home buyers finance their purchases with a mortgage. Of those people who finance a purchase, nearly 90% of them opt for a 30-year fixed rate loan. The 15-year fixed-rate mortgage is the second most popular home loan choice among Americans, with 6% of borrowers choosing a 15-year loan term.

Source: Freddie Mac’s 2016 home buyer statistics, published on

What Is A Longer Mortgage Term

In the UK, anything longer than the UK average of 25 years is considered a longer, or extended, mortgage term, with the maximum available term stretching to 40 years.

Mortgage terms have been getting longer, with 30-year terms now common. In the mid-2000s, first-time buyers would most likely get a 25-year term. Now, over 40% of first-time buyers take out a mortgage that runs for 30 years or more.

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The Chinese Real Estate Bubble

In China’s booming real estate market it is not uncommon to falsify income statements to qualify for unaffordable loans, hoping to gain from further property price appreciation.

Rapid urbanisation, combined with unprecedented monetary easing in the past decade, has resulted in runaway property inflation in cities like Shenzhen, where home prices in many projects have doubled or even tripled in the past two years. City residents in their 20s and 30s view property as a one-way bet because theyve never known prices to drop. At the same time, property inflation has seen the real purchasing power of their money rapidly diminish. … The lesson was that if you dont buy a flat today, you will never be able to afford it, Wang, 29, said.

Real estate fraud is so widespread in China it typically goes unpunished.

The motive for widespread mortgage fraud is simple: fear of missing out. Millions of homeowners are enjoying the sensation of ever-expanding wealth. The average value of residential housing in China more than tripled between 2000 and 2015 as a huge property market emerged from the early decades of economic reforms.

The boom in property prices across tier 1 Chinese cities has made much of the rest of the world look cheap to Chinese investors. Bond market manipulation by central banks have coupled with hot money from China promoting real estate bubbles in Hong Kong, Vancouver, Toronto,San Francisco, Melbourne, Sydney, London and other leading global cities.

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Why Save Up For A Large Down Payment If The Mortgage Rate Is Higher

In most cases, a high-ratio insured mortgage will have a mortgage rate that is lower than a low-ratio mortgage with a down payment greater than 20%. Why bothersaving up for a large down paymentif you can make a small down payment and get an even lower mortgage rate? The answer lies in the cost of the mortgage default insurance, which isnt free.

CMHC insurance premiumscan add thousands of dollars to the cost of your mortgage. The cost of this mortgage default insurance will either need to be paid upfront or it will be added to your mortgage principal balance. Adding the cost of the mortgage insurance to your principal means that you will be paying interest on the insurance over time, adding on to the cost of your mortgage. The CMHC insurance premium will depend on the size of your down payment.

Homes Not In Designated High

The limits in the first row apply to all areas of Alabama, Arizona, Arkansas, Delaware, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Wisconsin & most other parts of the continental United States. Some coastal states are homes to metro areas with higher property prices which qualify the county they are in as a HERA designated high-cost areas.

The limits in the third row apply to Alaska, Guam, Virgin Islands, Washington D.C & Hawaii.

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Canadian Mortgage Calculator For Vancouver Real Estate With Amortizations Up To 40 Years

I am both a property owner in Vancouver and a Realtor. I am constantly watching the mortgage market here in Canada to see how changes to mortgage interest rates and amortization affect both the Vancouver real estate market and my personal real estate holdings.

The current ultra-low mortgage rates have really focused my mind on mortgages and one of the things I use online A LOT is a mortgage calculator.

Frustration with Online Mortgage Calculators

Consistently finding a good Canadian mortgage calculator that could work for both investors and owner occupiers was quite frustrating for me. In using online mortgage calculators I noticed that many of the calculators I found are specific to the US and not Canada.

This mortgage calculator you see above is proudly Canadian and Canadian made! Among the Canadian mortgage calculators, I also noticed that they could not do long amortizations out to 40 years.

Why are 40 Year Amortizations on this Mortgage Calculator?

In the Spring of 2011, Canadas Department of Finance changed the amortization rules so that INSURED mortgages could not have an amortization longer than 35 years.

But keep in mind, that is ONLY for mortgages INSURED by the CMHC which are at 80% loan to value .Amortizations of up to 40 years are still allowed in Canada?

Just to clarify, you can get up to a 40-year amortization on low ratio mortgages!

Worried about Buying a Nightmare Condo in Vancouver? Check out this great post on How To Avoid Leaky Condos!

Prepare Your Credit Before Applying For A Mortgage Loan

Whether or not you’re thinking about pursuing a 40-year mortgage, it’s crucial that your credit profile is in tip-top shape before applying for a home loan. Check your credit report and to determine where you stand and take steps to address potential issues that could affect your approval odds.

This may include paying down credit card debt, bringing past-due accounts up to date and more. Also, avoid applying for new credit in the six to 12 months leading up to your mortgage application because it could impact your credit score and your debt-to-income ratio.

As you prepare to apply for a mortgage loan, working to improve your credit can help you reduce your monthly housing costs and maximize your total savings.

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What Companies Offer 40

Not many Australian-based companies offer these long mortgages. The most popular choice amongst home buyers is Pepper Home Loans. This company offers loans that last 40 years on homes. However, the interest costs and rates are high! They do not allow a lot of people to have this option, though.

According to their website, Pepper Home Loans requires a home to cost a minimum of 50,000 AUD to be eligible for this loan. It is a popular choice among young couples who cannot pay a large down payment or the settlement costs. As rent rises, more people will look at longer mortgages.

Other lenders only consider 40-year mortgage loans with specific cases as the timeframe is long. An average homebuyer is 30, meaning they will complete their mortgage at 70 if they have a 40-year mortgage.

Where To Get A 40

Once again, 40-year mortgages are not easy to find. Since the loans are not funded by the major mortgage agencies, like Fannie Mae and Freddie Mac, they are considered nonconforming mortgages. That means theyre only available through direct lenders like banks and credit unions that provide them out of their own portfolios.The search for a 40-year mortgage will not be easy. Theyre not commonly offered by major national lenders, which will require you to search available lenders in your immediate market.For example, Quicken Loans/Rocket Mortgage the largest mortgage originator in the country doesnt offer a 40-year option. And popular mortgage search sites, like Bankrate, dont even offer search options for a 40-year mortgage.That said, we did find two lenders that advertise 40-year mortgage products:

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Can I Lengthen The Term On My Existing Mortgage

Lenders will generally let you apply to extend your mortgage term, but they will need to run some checks on you before extending it.

Note that lenders will also have a maximum age limit that is, if youll be so old by the end of the mortgage term that you might not be earning, you may not be able to extend.

Naturally, the lender will want to be reasonably sure that you will afford the monthly repayments for the entire length of the loan.

Mortgage Critical Illness Insurance

Mortgage critical illness insurance provides a benefit if you suffer a life-threatening issue, such as cancer, heart attack, or stroke. Critical illness insurance usually has a smaller coverage benefit, and it has slightly higher premiums. Some policies might not cover pre-existing conditions up to 24 months before the start of your coverage. You might also need to complete a health interview.

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Your Rights And Responsibilities As A Borrower

Its important to know your rights as a mortgage borrower. When applying for a mortgage, your lender must provide information such as your mortgage principal amount, your mortgage interest rate, yourannual percentage rate , term, payments, amortization, prepayment privileges and charges, and other fees. This can be provided in an information box in your mortgage agreement.

Changes to your mortgage agreement will need to be made in writing within 30 days, or it can be disclosed electronically. Your lender must also give you a renewal statement at least 21 days before the end of your term, or let you know if they will not be renewing your mortgage. If your lender is a member of the Canadian Banking Association, which includes most major banks operating in Canada, your lender may have agreed to provide additional information, such asonline financial calculatorsor other information that can be used to calculate mortgage prepayment charges.

Your lender also has rights, such as the right to inspect your title or the right to sell your home if you dont make your mortgage payments.

You also have responsibilities as a mortgage borrower. It’s important to carefully read your mortgage agreement and ask your lender questions if you don’t fully understand any terms or conditions.

Comparing Mortgage Amortization Periods

When comparing 20-year and30-year amortizationsto the 25-year amortization at a 2% mortgage rate:

• A 20-year amortization increases your monthly mortgage payment by $412/month, but reduces your total interest cost by $28,116
• A 30-year amortization reduces your monthly mortgage payment by $269/month, but increases your total interest cost by $30,139

If you can handle higher monthly mortgage payments, a shorter amortization period can save you thousands of dollars. Many banks and mortgage lenders also allow you to shorten your amortization period by making additional mortgage prepayments, such as through lump-sum principal prepayments, doubling your regular payment amount, and increasing your payment schedule.

The payment frequency determines how often you will make mortgage payments.

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Open Vs Closed Mortgages

You may often notice a significant difference in mortgage rates betweenopen and closed mortgages. Open mortgages allow you to make principal prepayments at any time without any charges or penalties, which makes it very flexible. This flexibility is counterbalanced by open mortgage rates being higher than closed mortgage rates.

Choosing a closed mortgage can let you access much lower mortgage rates at the risk of prepayment penalties if you go over your lenders annual prepayment limit. Things like selling your home or a mortgage refinance can cause you to have to pay significant prepayment penalties. This could be avoided with an open mortgage, but youll have to pay a higher mortgage rate.

What Are The Disadvantages Of A Long Term Fixed Rate Mortgage

1. The cost

The main downside is the expense. Interest rates on long term fixed rate mortgages are a lot higher than the rates on short term deals.

For example, the interest rates on Habitos mortgage range vary between 2.99% and 5.35% depending on the:

• Size of your deposit
• Length of the mortgage term

These rates are a lot more expensive than shorter term deals, so you risk missing out on the really cheap deals currently on offer.

But you have to weigh up whether the predictable repayments are worth the extra cost.

2. Restrictions

Some banks impose age limits on their long term mortgages to prevent running the risk of people paying off loans in retirement.

Its worth noting that banks like Santander, that offer a 40 year term, have a maximum age limit of 75 for borrowers. So those over the age of 35 wont be eligible.

3. Exit fees

Bear in mind that some long-term fixed-rate mortgages come with hefty exit penalties if you decide you want to switch before the term has ended.

While lenders like Habito dont charge exit fees, make sure you understand any costs you could end up paying if you decide to exit your deal.

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Whats The Difference Between Mortgage Term And Mortgage Deal

Remember that mortgage term and mortgage deal are two different things.

The overall mortgage term is the total length of time you will take to repay your loan .

The mortgage deal, on the other hand, is the period of fixed or favourable interest rates at the start of your mortgage term, which may last up to 10 or 15 years, but is more usually between two and five years.

When your deal is coming to an end, you remortgage to another one.

When you remortgage, you may or may not extend your mortgage term.

For example, if you start on a 25 year mortgage and remortgage five years later, you might switch to a 20 year mortgage term.

Alternatively, you might take out another 25 year mortgage in order to get lower monthly repayments .

What Is A High

A mortgage with a down payment below 20% is known as ahigh-ratio mortgage. The term ratio refers to the size of your mortgage loan amount as a percentage of your total purchase price.

All high-ratio mortgages require the purchase of mortgage loan insurance from either the CMHC, Sagen, or Canada Guaranty, since high-ratio mortgages generally carry a higher risk of default.

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When Does It Make Sense To Get A 40

A 40-year mortgage could make sense for some borrowers who are especially strapped for cash and rely on a lower payment to qualify for a larger loan amount. Another possible candidate for a 40-year mortgage is someone who would like to secure the lowest possible payment for the longest period of time.

A 40 yr mortgage can allow for flexibility in a borrowers budget because of the lower monthly payment. And if financial circumstances change, consumers have the ability to make extra payments to pay off the loan faster than the 40-year mark. If you predict your income will increase, you might also be able to refinance to a shorter-term loan that could help offset the interest youve already paid.

If you plan to sell the house soon, the lowest 40-year fixed mortgage rates available might be a strategic move for you. On the flip side, a 40-year mortgage could also be an OK option if you plan on staying in your house indefinitely. This will depend on your current financial situation and the housing market in your area.

Though its not a particularly wise decision in most cases, a 40-year fixed mortgage can allow borrowers to purchase a more expensive home for the same monthly payment as a 30-year fixed payment.

Are you a high-income earner? There could be a potential tax write off for the large amount of mortgage interest that occurs with a 40-year fixed mortgage.

Are There Requirements To Qualify For A 40

Yes, there are a few eligibility requirements for a 40-year mortgage amortization with Sunova Credit Union.

• A 20 percent down payment on the purchase price of the home.
• The home-buyer needs to be making money.
• The mortgage can only be for a main residence.

I also like to remind all who are interested that your mortgage rate may be higher as this depends on your credit score, net worth, and your total debt service ratio. Your lender will be able to talk about these requirements and your eligibility in more detail.

Finally, a more general requirement is to realize that although a 40-year mortgage amortization will lower your monthly payments, you will be paying more interest in the long run. This is something you and your Sunova lender should discuss in full to determine what mortgage amortization is right for you.

If this might be of interest to you, I highly encourage you to reach out to me or another Sunova lender We look forward to hearing from you and cant wait to make your home-buying dream a reality.

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