Quick -- what do you know about Countrywide Financial
Well, over at Michelle Leder's site, footnoted.org, I read of a new push by Countrywide. Leder's husband received a letter from the company offering a "lower, more affordable monthly mortgage payment than traditional 15 or 30 year loans." What exciting offering is this? Nothing less than a 40-year mortgage. Leder saw this gambit as Countrywide "trying to hook more people on crack."
Countrywide isn't alone. Fannie Mae
I suppose that to some people this deal might look good, if it could keep them from losing their houses. It would, for example, be a way to refinance an adjustable-rate mortgage (ARM) that's about to reset a much higher interest rate into a fixed loan. But don't consider it without a lot of due diligence. Note that:
- The savings aren't always great, partly because interest rates on 40-year loans are higher than what you'd get for a 30-year fixed mortgage. If you end up saving $50 or $100 per month, it might well be worth it to scrape that money together elsewhere.
- Those extra years mean you'll pay a lot more in interest. A lot. You'll build equity very slowly -- which will hurt if you turn around and sell the house within a few years.
- If you're planning to sell within a few years anyway, you might be better off opting for a new ARM, one that offers a fixed rate for perhaps five years before starting with adjustments. Such a loan could help you build equity faster and might offer lower payments.
If you're interested in home-buying and selling, visit our Home Center. You might also want to check out these articles:
- Early Christmas for Mortgage Borrowers
- The Easy Path to Home Ownership
- Others' Foreclosures Can Hurt You