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Wondering if the income needed to buy a home in the top 50 metro areas is starting to decline? Hint: Not yet.

Wondering if the income needed to buy a home in the top 50 metro areas is starting to decline? Hint: Not yet.

Have you ever heard of a 60-year mortgage?

Q: Have you ever heard of anyone financing a 60 year mortgage?

A: For a time during the great real estate boom, when home prices were skyrocketing and mortgage products designed to "improve affordability" were all the rage, we did see some unusually long terms for mortgages. However, the longest such offers were usually 40 years.

Fifty-year mortgages

That said, mortgages with 50-year terms did enter the discussion.

As home-price gains were rapidly outstripping income growth, fully-amortizing loans with 50-year terms were compared against more traditional loans with interest-only payments as a way to maximize purchasing power. However, the mortgage market collapsed before these extended-term loans could get much of a toehold in the market.

Higher interest costs

While the long term lowers the loan's monthly payment, the total interest cost is considerably higher and the rate at which equity is built slows to a snail's pace.

The monthly payment on a 30-year, $100,000 loan at 4 percent is $477.42 with a total interest cost of $71,869.51

Mortgage calculator: Calculate your monthly payment

For a 60-year loan, the payment slips all the way down to $355.74 (about 25 percent lower), but the total interest cost rises to $164,041--some 230 percent more! Also, after paying for 30 years of the 60-year term, you've not only already paid more in interest ($109,352) but you still have another $76,592--and 30 years--to go.

Hard to advocate for 60-year loans

Excepting the ability to leverage an income to a greater degree, it's hard to make a positive argument for a long, long term mortgage, even if you could find an investor who wants to lock up more for that long of a period. After all, who wants to get a loan at the age of 30, and still be paying it at 90?

Ask the expert
Keith Gumbinger
Keith Gumbinger
Mortgage Expert
Vice President, HSH.com
About Keith: Mortgage market observer and analyst with 35 years experience... (more)
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