The next great in real estate financing
History shows that every so often the real estate industry incurs some sort of “fad” in terms of investing. These so called fads draw in home buyers like flies to fly-paper. First were the crazy loans given away at ridiculously low rates generating the refinance boom of the late 90s and early 2000’s. Naturally, interest rates began to increase and the flies swarmed towards adjustable rate mortgages in hopes of getting the lowest rate possible. Finally, the choice of monthly payments applied strictly to interest and not principal became available.
If you’ve spent anytime watching television the past few months you may have heard about reverse mortgages. Reverse mortgages basically payout a homes equity in installments to the owners and are becoming very popular amongst retirees. As the backlash of many of these unconventional mortgages start to take their toll, a new kind of mortgage is slowly starting to emerge. The forty to fifty year mortgage, I believe, will be the next big trend in home mortgages.
Increasing energy costs and a general increase in the cost of living have caused a concomitant rise in the cost of housing (not very surprisingly). With housing costs steadily increasing it appears that the only viable means of keeping rates low enough to qualify is by extending the period of the loan. A forty or fifty year loan will of course have a much higher interest rate but the monthly payments will be substantially lower than a comparable fifteen year of thirty year loan. At the time of this writing, only a few mortgage brokers nation wide offer forty and fifty year mortgages.
However, skilled and experienced lenders are downright experts when it comes to economics and they know perfectly well that getting buyers into homes is crucial for the national economy or, for that matter, the world economy. Lenders understand that they need to keep the real estate market as liquid as possible and to do this they have to make mortgages as obtainable as possible. One of the keys to success in real estate is the ability to predict future trends. But because very few of us possess psychic abilities, predicting the future is not easily accomplished.
The next great trend in real estate financing may or may not be extended mortgages, although it definately looks that way. It pays to be prepared and if you are interested in capitalizing upon the next great trend then you need to learn what’s happening in the market. One way or another, with things being the way that they are now, something has got to give.
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