The next great in real estate financing
History proves that every so often the real estate industry goes
through some sort of “fad” in terms of investing. These so called
fads bring in home buyers like flies to fly-paper. First were the
crazy loans given away at ridiculously low rates causing the
refinance boom of the late 90s and early 2000’s. Naturally, interest
rates began to rise and the flies swarmed towards adjustable rate
mortgages in hopes of getting the lowest rate possible. Finally, the
option 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 come out. 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 less 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 understand perfectly well that
getting buyers into homes is crucial for the national economy or,
for that matter, the world economy. Lenders know 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 certainly 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 going on 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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