P
eople are more familiar with the 15 and 30-year mortgage terms; lenders have offered the two options for years. There is, however, a third option, the 40-year mortgage option. It represents an extended mortgage term that allows you to make lower monthly mortgage payments for a certain period of time. And though the 40 years may sound like a very long time, this plan might be the saving grace for millions of Americans unable to keep up with their high monthly mortgage payments. The government-owned mortgage bond corporation Ginnie Mae announced earlier this year the new 40-year mortgage option. The option will be available to homeowners with 30-year mortgage terms. According to Ginnie, Mae would be offered by one of the government agencies backed by the government-owned mortgage bond corporation.
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How does the 40-year mortgage option work? The Ginnie Mae 40-year mortgage option is a loan extension program, similar to the Hope program of the financial crisis of 2008, that seeks to help people facing financial hardships. To avoid losing their homes in foreclosure, it intends to make mortgage payments more manageable for families whose incomes were hit hard during the pandemic.
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New Option Now Available: The 40-Year Mortgage Option “As interest rates rise, this 40-year feature will enable more payment reduction options to help homeowners,” Alanna McCargo said after Ginnie Mae’s announcement. “Ginnie Mae has been integral to the interagency actions to prevent foreclosure for homeowners experiencing financial hardship as a result of the [the COVID-19 pandemic].” Under this new option, you get to choose the payment option for the first ten years. After the ten years have lapsed, it is assumed that you are back on your feet, and your loan will revert back to the standard 30-year mortgage term. This means your monthly mortgage payments will go towards reducing your loan principal. However, with this third option, your payments in the years after year eleven will be considerably higher. In addition to this, investors will also be able to purchase securities backed by modified 40-year loans.
THE POWER IS NOW MAGAZINE | DECEMBER 2021
