Bankers Split on Wisdom of 40-Year Mortgages

Some lenders are beginning to venture into 40-year, fixed mortgages, which proponents say will boost home ownership.
By: Mike Copeland: REALTOR® Magazine Online
Some lenders are beginning to venture into 40-year, fixed mortgages, which proponents say will boost homeownership rates by lowering monthly payments.

However, critics contend that borrowers will build equity too slowly, and that those who could not otherwise achieve home ownership may encounter difficulty making their monthly payments as other expenses rise.

The product is not generating much interest so far, but some loan officers believe 40-year mortgages are suitable for families who plan to move or refinance within five to seven years and want to free up cash each month in the short-term. Fannie Mae already purchases 40-year loans, and Freddie Mac will follow suit beginning next month.