Great news. I received a letter in the mail today from Countrywide home loans. Apparently they’ve done the math for me and I could be paying less every month for my mortgage by switching to a 40 year loan. Here are the benefits that they listed:
-Lower your monthly payments
-Consolidate or pay down higher interest debt
-Get cash to do the things you want to do
-Streamline your finances
Talk about fluff. It’s too bad that they don’t show you a graph of how bad you’d be screwing yourself by turning a loan that has 26 years left on it into a new 40 year loan. Imagine the additional interest that you’d pay them. Heck, a 30 year mortgage is bad enough. I definitely wouldn’t want to extend it any farther. I ran the numbers once before out of curiousity and was amazed to see less than a $200 monthly reduction for another 10 years of debt. It’s definitely not for me. I can see where people in much more frothy markets might opt for it though, just to get in to a house.
Before you get too excited, I should probably tell you that this is an invitation only offer. Without a reservation number they won’t talk to you……… unless you have a pulse.
Did they mention closing costs or points? Even in the fine print?
Nope. They made no mention of closing costs. They did say, in the fine print, that the mailing wasn’t a guarantee that they would actually offer me the 40 year mortgage. I’d need to contact them and give them more specific information before they could do that. I’m sure they’d stick it to me on closing costs too, making this an even worse deal.
Di you think that you could roll any higher interest debt in to your mortgage. Then use the difference saved to pay in to an investment that earns more than the mortgage amount. Once your investment is over the balance of your mortgage you cash out and pay off early.
I chose a long mortgage (35) with easy lump sum repayment options and the ability to change my payment amount. This way in financial difficulty (like a family job loss, sickness, or anything at all) my mortgage payments are low. If everything goes well for a year I have a nice lump sum to dump on there.
Amortization periods don’t mean much unless you don’t have repayment options or any abilities to adjust your payments. Your ‘true’ amortization will only be known when you make your last payment.
I can’t believe that 40 year mortgages exist….but then again…you’re less likely to foreclose on a house if you have options that let you pay less….hm…