30 year Mortgage todayThirty years of mortgage today
30-year fixed-rate mortgage | Global Equity Finance
Advantages of a 30-year mortgage: Distributing a credit over a 30-year term allows you to make a large buy that you normally cannot make. With a 30-year mortgage, you have a low level montly payout that allows you to distribute your money in other areas of your lifetime. Mortgage interest can be written off for the purpose of reducing the amount of your mortgage liability.
30-year straight mortgage loans make the most sense in today's mortgage markets, as the interest rates are almost the same as the 15-year straight, but with a much more agile repayment plan. Our mortgage prepayment fines are zero, so you can repay your mortgage at your own speed.
Anyone want a 30-year mortgage?
Although we may have forgotten the giant short-term concern - that the German state is in the residential property sector mainly because most major financial institutions just don't offer mortgage loans that can't be secured by Fannie, Freddie or the US House Administration - there is the fact that the state' s commitment to property has been consistent since the early thirties.
An unsupported mortgage would almost certainly mean the downfall (for most middle-class Americans) of this popular favourite, the cheap 30-year fixed-rate mortgage. A mortgage with a 30-year interest fixation ( especially one that can be paid out early and without penalty) is a great thing for a house owner.
Part of the risks of absorption of these loses is a large part of what the governments are doing in the residential area. For example, Fannie Mae and Freddie Mac were set up by the German federation to buy mortgage loans from creditors, thus allowing them to reverse and spend more of them.
One of the things this permitted was for creditors to leave their accounts on the two types of risks involved in a mortgage. We are all now sorrowfully acquainted with a kind of lending exposure - that is, the threat that a borrower will not repay the mortgage. Secondly, there is the interest risks, the dangers that interest levels will increase strongly after the mortgage is taken out, thus placing a burden on the banks with money-losing credits.
The longer a mortgage takes, the more challenging it is to cope with these two types of exposure. Today, solvency has become an atrocity, and by supporting it, Fannie and Freddie are supporting the real estate markets. Bankers who make mortgage loans don't want to take borrower's money, and neither do financial people.
In fact, William Gross, co-founder and CEO of Pimco, the mutual fund's fund manager, said that his fund would not buy a pool of so-called private-label mortgage assets - which have no sovereign guaranty - unless the owners concerned made a deposit of at least 30 per cent. Fannie Freddie's recently most effective proposal for reforms - several of which were supported by former finance minister Hank Paulson, among others - demands new commercial units that would retain loan guaranties for mortgage loans.
However, these safeguards would not be entirely personal, as they would be expressly supported by the full belief and recognition of the United States. While there are various suggestions as to how this could be done with less tax payer exposure than Fannie and Freddie, of course we are still discussing the participation of the state.
There is something perverted about starting businesses that would face exactly the same kind of risks - credits - that Fannie and Freddie destroyed in 2008. Moreover, we are joking ourselves if we do not think that once the memories of the real estate bubble begin to pale, these new beings will not be under magnetic duress to keep the prices of their loan guaranties low in order to keep the 30-year mortgage also low.
Wouldn't it be a better option for bankers and other financiers to provide mortgage offerings that they really want to keep on their own accounts? It is possible that these would take the shape of 15-year mortgage loans with an interest rating that would be revised after five years, so that there would be no need for bankers to be concerned about the long-term interest exposure.
Not even the extinction of 30-year fixed-rate loans could mean this - the retail mortgage markets have in the past passed them on to customers whose mortgage is too large to be eligible for a Fannie and Freddie Warranty. Quite certainly, any 30-year-old item would be available on a more restricted base and at a higher cost than today.
Fannie argued in the run-up to the financial turmoil that his guarantees allowed consumer interest rates on their mortgage to be cut by a fourth to half a point per annum; today Mr Gross says that without a state guarantees, a mortgage would be at least several points more costly. Assuming his figures are correct, mortgage loans - especially 30-year mortgage loans - would be much more costly, and the US home buyer base would contract.
Finally, other jurisdictions do not have the common access to 30-year fixed-rate loans. However, is there an US political figure who would take blame for the further depression of the residential property markets? However, even the readiness to have more costly mortgage loans would not fully get the goverment out of the residential property markets.
Remember that before the bursting of the 2007 credit crunch, the consumer industry did not perform much better than government-sponsored companies in mortgage watch. If one of our ever-growing banking groups, one that is crucial to the mortgage industry, were to get into difficulties, what would become of it in the coming years? Be careful of policymakers who carry the promise of a flawless global economy where ordinary Americans can get the mortgage we all rightly believe in now and the governments are nowhere to be seen.