40 Year Mortgage A New Option For A New Era
The 40 year mortgage makes monthly home payments more affordable, especially in areas where the real estate prices have skyrocketed. It is an attractive tool for homeowners who might otherwise be priced out of the housing market entirely.
In order to understand the 40 year mortgage, we have to look at the history in which the concept came about.
The standard 30 year fixed rate mortgage was developed in the 1930s. In 1935, the average home cost $3450 and the average salary was $1600. That means, the average home cost just over two years salary.
Fast forward to today. In 2005, the median home price in California was $524,000 while the average salary in that state was $43,000. As you can see, homes now cost ten times annual salary. This makes spreading the payments out over a 40 year mortgage quite attractive.
Another difference was that in the 1930s, people bought homes that they would live in until they died and then pass down to their children. Today, people live in a purchased home for just 8 to 10 years on average.
All of this makes the lower payment 40 year mortgage an attractive option for...
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