Two more credit unions have expanded into fixed-rate mortgages with 40-year terms. The $165-million MidWest Financial Credit Union here said it was partnering with UMHS Financial to offer the product. UMHS serves the University of Michigan Health System. "The 40-year, fixed-rate mortgage product will help make homeownership a reality for more of our members as it is an ideal product for those who are challenged by affordability issues and think homeownership is out of their reach," said VP-Real Estate Tonya Coon.
Similarly, in New Berlin, Wis., Landmark Credit Union is also offering the 40-year, fixed-rate mortgage. There are no income or purchase price limits on the loan. A minimum down payment of 5% is required.
"With people living and working longer and home prices increasing, it makes perfect sense to extend loans to 40 years," said LCU President Ron Kase, Landmark President.
On a $150,000 home loan (based on recent rates and 20% down payment) the monthly payment is reduced by about $40.00 when the term is extended from 30 to 40 years. The credit union is waiving its own processing, document preparation and closing fees, bringing the average savings to an estimated $980, and offers a free VIP Checking Account to borrowers in its First-Time Home Buyer Program.
The credit union acknowledged that some will argue that a 40-year home loan is not advisable because it will cost more in the long run. "While that is significant if the loan is kept for 40 years, the average home loan lasts only seven years," the credit union said. "By the time they move or refinance, home owners are usually earning more money, have paid off other debts, the property has increased in value, and they are ready for a shorter-term loan."
