50-Year Mortgage Creating Home Owners, But With Risk

May 10, 2006 – Posted at 4:01 p.m. CDT

JONESBORO, AR -- As home prices and interest rates continue to rise steadily, lenders are trying to figure out how to keep the dream going for the millions of folks who want to own their home. A new half-century mortgage may do the job, but it comes with some risk.

According to a report Wednesday in USA Today, a handful of small lenders have now begun offering 50-year adjustable rate loans to help buyers keep payments low during the current economic conditions.

"The loan in question is basically a five year arm, or adjustable rate mortgage and it's maturated over 50 years," said Regions Bank mortgage loan officer Brian Arnold.

The loans are primarily for real estate in California , where the median household purchase price is a little over $500,000 dollars.

"You're able to get into a more expensive house, but if you have to maturate it over fifty years, I think you are trying to purchase more house then you really can afford," said Arnold.

The 50 year mortgage is ideal for those who plan to stay in their home for about five years, while the loan's interest rate remains fixed.

"Most people haven't gone to that level yet with interest rates rising but that may be one option for them. It does require five percent down," said Arnold, "The difference in the payment is not that much, but it may allow that borrower to go from $100,000 to $120,000 loan."

While a 50-year mortgage may not be that common in Region 8, it does signal that a cooling real estate market is heating up competition among lenders.

Many banks do offer a 40-year mortgage, including Regions Bank, which account for about 5% of all home loans.