Many new home loan programs make it possible for anybody to get approved for a mortgage regardless of credit or income. Because of rising home prices, many qualified loan applicants are finding it difficult to afford a new home. With these individuals in mind, several loan companies have started recommending a range of mortgage loans offering affordable monthly payments.

The 40-Year Home Mortgage

Traditionally, home mortgage loans have a term of 30-years. Those who can afford a higher monthly payment, and who wish to payoff the mortgage earlier may opt for a 15-year term. Ideally, paying on a home loan for 30 years would offer an affordable monthly payment. However, due to an increase in home prices across the nation, many young couples and those with modest incomes are unable to afford overpriced homes.

The 40-year home loan is similar to the 30 and 15 year terms. The only difference is that the mortgage is extended an additional 10 years. Of course, homeowners will pay more interest. The 40-year mortgage does not offer a tremendous savings, but it may provide a cushion. On average, homeowners can expect a monthly savings of about $200 on a $250,000 mortgage.

Interest-Only Home Loans

Within the past five years, interest-only home loans have increased in popularity. Again, these loans are advantageous in overpriced housing markets. Nonetheless, there are pros and cons to these sorts of home loans.

With an interest-only loan, homeowners only pay the interest for a specific term, usually five or seven years. However, you may obtain a loan with an interest-only period for three or ten years. During the interest-only period, all payments are applied toward paying the interest, and not reducing the principle. Thus, mortgage payments are lower.

Interest-only loans are beneficial because they create more affordable housing. The downside is that once the interest-only period ends, mortgage payments will increase.

Because monthly interest-only mortgage payments will not reduce the principle balance, at the conclusion of the interest-only period, homeowners will owe the original mortgage amount. If the housing market continues to increase, this will not pose a problem. However, if home prices decrease, those who select an interest-only option may be unable to sell their homes.