Benefits, Risks of the Half-Century Mortgage Loan

Some buyers who can't afford a standard 30-year mortgage, and aren't comfortable with a 40-year mortgage either, are finding a 50-year loan to be an attractive option. But there are risks.
By: Noelle Knox and Mindy Fetterman: REALTOR® Magazine Online
While many banks offer the 40-year product — which accounts for 5 percent of loans — 50-year mortgages are harder to find, according to LoanPerformance, a real estate data firm. So far, only a few small lenders have rolled out the five-decades-long mortgages.

Statewide Bancorp in Rancho Cucamonga, Calif., has had about 220 applications since March when it began offering the 50-year term. The loans are luring cash-strapped buyers who are having a hard time coping with soaring home prices. Although 50-year mortgages come with lower monthly payments, but borrowers build equity very slowly and risk owing more than the home is worth.

Also, because rates on the loans are adjustable, monthly payments could rise over time. Still, observers say, the 50-year mortgages are less risky than interest-only or option mortgages.