40 year loans - is it a good idea?

Question

If my wife continues to work full time we can pay off our home in 2 years but she may have to work less than full time due to health reasons and there is also the possibility she might have to stop working to care for her mother. We are trying to plan out strategies how to continue paying off our home if she works less or must stop working for a few years.

If we can get a 40 year loan the mortgage payments will be about 2/3 or less of our current payment. We would not feel at risk for problems being able to afford the house . If she must stop working we would move into her mother’s home and would rent out our home. Rent would cover all expenses- taxes, mortgage, Gardner, maintenance,insurance and property management if necessary.

Her mother’s home would require a $700 mortgage payment from us. Her mother would pay all utilities.

Once the house is paid off we want to start investing in real estate.

What are your thoughts? Is this a good idea? Do you know of any lenders that have 40 year loans? Thank you

Account Closed · Answer

@Chris Mason Seems well versed in loans and probably knows the answer in that market. Interesting question, i think if im not mistaken, America is one of the few places you can do the 30 year......

Michael Zau · Answer

Because most mortgages are front loaded with interest, you want to max the cashflow and max the tax writeoff. In larger cities, where the prices escalate quicker, the BRRRR method works  as a refi every 2 -4 years into the cashflow where the actual caps are lower.  The lower priced cities are where monthly returns are higher and so you want to amortize longer so that you can maximize the cashflow.  There is no right or wrong method, there is a strategy with every investor however and the plans that it takes does involve debt and the period of payoff.  The emotions that go with debt can be high so thats why the strategies are different.

Chris Mason · Answer

Non-qm 40YF exist. Some have an initial 10 years of interest only payments, and then it becomes a 30YF at the 121st payment, still at the rate you locked in initially. As Cody hinted at, they are a bit of a pain to get through underwriting - if you NEED a 40 year loan for financial reasons, you will not meet the criteria. If you WANT a 40 year loan and are superbly qualified, they can be great.

Nicholas Covington · Answer

@Joe Frank 40 year loan do exist but they are considered “non-qm.” Normally they are reserved for jumbo loans for loans over 1mm as that is who it makes the most sense for.

What state are you in? I would recommend finding a mortgage broker as they will be the main ones with access to lenders with this program, although very few do it.

Cody L. · Answer

I’ve nevrr seen a 40 year but IMO longer is always better (giggity!)

You can make a 40 year a 30 (or 20, or 5) year loan by simply paying more if you wish. The opposit is not possible.

I assume, however, that if a 40 is offered it’ll come with some other trade off (more difficult underwriting. Higher rate. Etc. because who would want to be the lender of 49 year debt?)

Pavel Shemyakin · Answer

@Joe Frank

Non QM means Non qualified mortgage. Essentially, the lender cannot unload the loan to FNMA.

Joe Frank · Answer

I live in Southern California. I am just thinking a lower monthly payment will be safer if either scenario plays out. While she works we will continue paying down 200K balance.

@Nicolas Covington what does “non qm “mean?

Thank you for the reply

40 year loans - is it a good idea?

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