Sometimes these loans are really intended to be short term ''bandaid'' type loans. Let's say the bank will not income qualify you on a 30yr term, but you know that in 5yrs your income will be much higher. structure it as a 50yr term which will give you a lower monthly payment, when your income goes up in 5yrs, refi into a 30yr term or simply start making a 30yr payment. Investors usually just want the lowest monthly payment too. Sometimes a 50yr term can do this. Not always the best choice, but it's an option.
well, i think most people don't buy with the expectation to be in the same house in 30years or even 10years. even if they stayed in the house for 10years and it appreciated 2% per year, they would have over 100k in equity after 10years. even if it did cost them 350k in interest to get that equity. meanwhile, they would have about 200k if they had a 30y note on the house. the bets that 50y mortgage buyers are: 1. their income will increase / not decrease in the next 5-10 years 2. their home will steadily appreciate for at least 5-10 years 3. interest rates will be no worse in 10 years than they are today also, if anyone has stats on how often people house-hop (on average) that would be cool. i couldn't seem to google the right terms to come up with anything. well, other than most (about 85%) section 8 recipients receive their vouchers for 10y or less. btw, for anyone not familiar with Karl's calculator, go to http://www.jeacle.ie/mortgage/ and give it a whirl. good stuff.
I stand corrected. Thank you. LORD POLONIUS: Neither a borrower nor a lender be; For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry.
well why not? if you could lock in a fixed rate mortgage when their interest rate has been pratically 0% the past decade.