The internet was recently abuzz with news of a new type of home loan: a 40-year mortgage. Google searches for “40-year mortgage rates” saw an increase of 450%, and searches for “FHA 40-year mortgage 2023” surged more than 2,650%. However, the excitement was misplaced, as there is no new 40-year mortgage product.
In reality, the news was about the Federal Housing Administration (FHA) increasing the maximum term for a mortgage modification from 30 years to 40 years. This change aims to help homeowners in financial distress retain their homes after defaulting by allowing them to have lower monthly payments. It will also provide consistency and simplicity when addressing adverse market conditions, national emergencies, and natural disasters, aligning FHA with modifications available to borrowers with mortgages backed by Fannie Mae and Freddie Mac.
The product IS NOT available for those looking to purchase a new home or refinance. Instead, it only applies to current homeowners who hold FHA mortgages and have already defaulted on their loan. By extending the duration of their mortgage to 40 years, the loan modification can help these borrowers avoid foreclosure and bring their loans back to their current status.
While a 40-year mortgage may have some benefits, such as lower monthly payments, experts warn that there are also drawbacks. Borrowers may end up paying more in fees and interest, and a loan modification could also affect their credit score.
However, the move is great news for struggling borrowers who are facing housing affordability issues due to rising living costs. The longer mortgage term will provide much-needed relief, and more borrowers will have the opportunity to retain their homes and build equity over time. The FHA's decision to increase the maximum term for a mortgage modification provides homeowners with a lifeline when they need it the most, ensuring they can continue to build equity in their homes over the long term. If you are looking for a 40 year mortgage calculator check that out here!
In a world where information can spread rapidly on the internet, it's important to stay vigilant and do your research before jumping on the bandwagon of a trending topic. Lean on a trusted real estate advisor for up-to-date information on rates and advice on how to time your next move. We're here to help! Please do not hesitate to reach out if you have any questions about the current market.