A long-term mortgage extends beyond the life of a typical loan, lasting up to 50 years. While most lenders prefer shorter mortgages, some allow them for properties in excellent condition or for investors looking to build equity. It can be advantageous for first-time homebuyers, but paying it off as soon as possible is recommended.
A mortgage is a long-term loan arranged through a bank, another lender, or the seller of a property. A long-term mortgage is one that extends beyond the life of a typical loan. A typical mortgage can last between 15 and 30 years, while a long-term mortgage can extend to 40 or 50 years or more.
Most lenders prefer shorter mortgages over a long-term mortgage. Considering the fact that many houses and buildings have already been around for several years, they certainly won’t be in their prime after another 50 years. The value of the property may not be enough to secure the loan at that time.
Still, some lenders will allow a long-term mortgage if a property is in excellent condition, has some historical significance, or if the borrower is an exceptionally good customer. Also, some investors use long-term mortgages to keep monthly payments low while they renovate a property, which they intend to sell as soon as possible after the work is done. They have no intention of paying for that property for 40 or 50 years, and they will pay the mortgage once the property is sold.
Still others use a long-term mortgage to build equity in a property. They make low monthly payments, renovate the property, and then rent or lease it. Using money paid by tenants, they pay off the mortgage quickly, making direct payments on principle. In no time they have equity built up in the property and can get more loans using that property as collateral. Equity basically means the value of a property minus the amount owed on it.
A long-term mortgage can be a beneficial tool for investors and can be an advantageous proposition for the youth or family buying a first home, since spreading payments over several more years keeps monthly payments low. The key is to use a long-term mortgage to your advantage, but pay it off as soon as possible. When you get such a loan, be sure to check with the lender and make sure there are no penalties, or at least minimal penalties, if you decide to pay off your long-term mortgage early.
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