Would you do a 40 year mortgage?
The Federal Housing Administration just approved them.
Here’s the maths:
30 year mortgage:
•400k home
•20% down (80k)
•7% Interest
•Loan amount= $320k
•Total monthly payment =$2128
•Total of 360 mortgage payments: ~$766k
•Total Interest paid: ~$446k
Mortgage payoff date: April 2053
40 yr mortgage
•Total monthly payment: $1988
Total of 480 mortgage payments: ~$954k
Total interest paid: ~$634k
Mortgage payoff date: April 2063
My take: if you need a 40 year mortgage to afford a home, you should rent until you can afford the payment on a 30 year mortgage.
Almost $200k more in payments over 40 years in this example is not worth paying $140 less a month.
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