Question:

Should I get a fixed 50-year or some Interest Only mortgage?

Answer:

In general, a fixed 50-year loan over Interest Only mortgage is a lot more useful. Why?

A 50-year fixed rate mortgage seems to make no sense - if you are 35 and you buy a house with a 50-year fixed rate loan the loan will be repaid when you turn 85. What is the point of that?

50-Year mortgages help build equity and avoid interest only loans.

For costly areas such as California, a 50-year loan may help avoid an Interest Only loan as payments will be lower compared to a standard 30-year fixed rate mortgage and you will still build equity. 40-year fixed rate loans are gaining popularity in California, anyways.

On the other hand, Interest Only mortgage loans discourage home buyers from building equity even though paying principal is a viable option for IO loans. Also, Option ARMs with their minimum payment option even get you further in debt if not used properly.

A 50-year loan is a great way to acquire a home and build equity in a high cost area. Given that 25% of the new home mortgages in California are 40-year loans it is possible that the 50-year mortgage makes quite a hit.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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