40 Year Loans (Investors and First Time Buyers)

[Joseph Bernal]

I'm a Real Estate Broker and Investor in WA state. I recently met with a local lender who is rolling out a 40yr loan package. He's supposed to send me the details but from what I remember it's a 40yr ARM. 20% down, the first 10 years you only pay interest only. My initial thoughts was this is a good way to be able to purchase an investment property in todays market so it actually cash flows. Obviously there is inherent risks but wanted to get your opinions. Initial thoughts?

They also are rolling out a 40 yr ARM for first time buyers @ 3.25 IR. IR is locked for the first 7 years. This is a play so that new buyers can be approved for more purchase price and the payment amount is lower. The lender said they will approve based on worst case scenario in the event IR rise dramatically to curb the risk for the buyer later on when the rate adjusts. Just like most loans through history, they create longer loan terms, I believe these will be more of the norm as the years go on. Thoughts?

[Kevin Romines]

I just closed a 40 year mortgage in December. The 1st 10 years was interest only followed by a 30 year fixed. This allowed the buyer to have a lower monthly payment during the 1st 10 years. As was stated by @Scott E.undefined The national average that someone is in their loan is between 5-7 years. In most cases, they will refinance or sell long before 40 years has past. As with anything, its a very useful tool, so long as you fully understand the ramifications of the terms on the loan. 

I hope this helps?