Maximum repayment terms on mortgages
Posted on Oct 1, 2000 08:15:27 AM
Today it is not uncommon to mortgages for which you can pay at retirement age.
Many banks offer loans for housing, which can finish paying in 65, 70 and even 85 years. There were also offers mortgages for 40 years. Taking such a loan, even in 20 years, the borrower at the date of termination payments are virtually guaranteed to pass into the category of pensioners. Banks offering such loans, shall be calculated on the fact that many people are beginning to receive significant revenues already rather mature age, and work continued into old age. But loans for a very long time are fraught with too large an overpayment, and the cost of life insurance – obligatory mortgages for retired citizens are increasing at least twice.
If children have not reached a sufficient age or income, to become a co-borrower on the loan parents, the bank could theoretically rely on the fact that relatives who inherit an apartment or house, will continue to repay the loan. “The legal rule of inheritance along with assets and liabilities of the testator (ie, a home mortgage apartment is inherited only from the condition for continuation of payments) is an additional guarantee” – draws the attention of Deputy Head of Mortgage Lending of the Bank of Moscow, Vyacheslav Shalamov.
But even without a co-borrower or guarantor a loan with a maximum repayment period can be obtained. The main risk – the risk of death of the borrower – the fear of all banks in the mortgage market. In conjunction with the norm of commitment heirs compensates for this risk almost entirely, except for the risk of costs associated with reclamation of insurance money or debt from the heirs.
Risks of the bank loans with a maturity of pension after the borrower, of course, have to compensate at own expense. Perhaps it will be an increased interest on the loan, but almost 100% of the significant increase in the tariff for mandatory life insurance.
Thus, the longer the term of the loan, the more the borrower will eventually pay the interest, “long” loans help lower the monthly payment.
Offers of banks to 40 years for mortgage loans, of course, take place, but their profitability is questionable for the client. Consider the standard mortgage transaction – a loan in the amount of $ 200 thousand, the rate for all time – 10% per annum, although usually with an increase in lending period increases and the rate on the loan.
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