## December 12, 2008

### 40 or 50 year mortgages

Right now my local credit union is offering a 40 year mortgage option. I've also heard of 50 year mortgages. These mortgages should give you a lower monthly payment but you'll have to pay longer.

If you borrowed \$100,000 at 6% then the monthly payment for a 30,40 or 50 year mortgage would be:
30 year = \$600, cumulative interest \$115,000
40 year = \$550, cumulative interest \$164,000
50 year = \$526, cumulative interest \$215,000

So your monthly payment will be a bit less. Your payments will be \$50-74 lower a month in this example. But you're paying for 10 or 20 years more and the total interest paid over the life of the loan will be considerably more. Between a 30 and 50 year mortgage you're paying \$100,000 more in interest!

Generally you should avoid a 40 or 50 year mortgage.

40 or 50 year mortgages are really only made for people to afford homes they can't afford otherwise. Instead of looking for a long mortgage you should work to buy a home within your means. Save up your money and buy a home that you can actually afford with a traditional 30 year mortgage or better yet a 15 or 20 year mortgage.