Are Longer-Term Florida Home Loans the Answer for Certain Buyers?

Here’s the question, of course: What is the best Florida home loan solution for a cash-strapped buyer?

As Florida home loan rates continue to rise, lenders and banks are considering longer-term deals for potential clients. For example, a 50-year home mortgage doesn’t exist yet, but the idea is being seriously batted around as home price increases continue to far outpace income gains, making monthly payments on more traditional Florida home loans less affordable.

The once-rare 40-year mortgage has already surged in popularity and at least one lender is now offering a mortgage five years longer.

Yes, Ownit Mortgage Solutions, has rolled out a 45-year loan, mostly with variable rates, that it calls “the perfect alternative” to interest-only Florida home loans “for borrowers who desire affordable monthly payments.”

Of course, going the 45-year route isn’t for everyone. Some analysts are skeptical that longer Florida home loans are truly beneficial to borrowers.

Non-traditional Florida home loan views

Neil Garfinkel, partner and real-estate specialist with law firm Abrams Garfinkel Margolis Bergson in New York and Los Angeles, says borrowers pay much more in interest with longer amortization mortgages than they save.

For a $300,000 Florida home loan at 7%, he said, the monthly payment for a 30-year schedule would be $1,995.91, and for a 45-year would be $1,829.10, a savings of about $166.81 a month or a little over $2,000 a year. But the interest paid over the full term would be $418,526.69 for a 30-year loan and $687,714.82 for the 45-year loan.

“Will it help consumers get into bigger houses? I don’t really know,” Mr. Garfinkel said. “But if a client is asking me would you do this, I would probably tell them no.”

At Ownit Mortgage, Julie St. James, senior vice president of capital markets, notes that home prices in the past several years have more than doubled in parts of California, the state where about half of the company’s loans are made. In California and other hot housing markets, borrowers who are stretching to get into homes are taking out riskier non-traditional home loans.

With the 45-year loan “there’s some principal reduction, whereas the interest-only doesn’t give you any,” Ms. St. James said. “That has an inherent value. Even if it’s just $1 of principal reduction, that’s $1 less that you’ll have to pay interest on.”

It’s at least something to consider for your Florida home loan.