Pros And Cons Of A 30-Year Mortagage, Foreclosure

Pros Of A 30-Year Mortgage

  • Lower monthly payment: Repaying a mortgage over 30 years means you’ll have lower, more affordable payments spread out over time compared to shorter-term loans like 15-year mortgages.
  • Stability: Having a consistent principal and interest payment helps you better map out your housing expenses for the long term. (Your overall monthly housing expenses can change, however, if your homeowners insurance and property taxes go up or down.) Of course, this is only true if your mortgage has a fixed rate. An adjustable-rate mortgage won’t give you this same benefit for the whole life of the loan.
  • Buy more house: With lower payments, you might be able to qualify for a larger loan amount and afford a more expensive home.
  • More financial flexibility: Lower monthly payments can provide more cushion in your budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.

Cons Of A 30-Year Mortgage

  • More total interest paid: Stretching out repayment over 30 years means you’ll wind up paying more in interest overall than you would with a shorter-term loan.
  • Higher mortgage rates: Lenders usually charge higher interest rates for 30-year loans because they’re taking on the risk of not being repaid for a longer amount of time.
  • Becoming house poor: Just because you might be able to afford more house with a 30-year loan doesn’t mean you should overstretch your budget. Give yourself some breathing room for other financial goals and unexpected expenses.
  • Slower equity growth: It will take longer to build equity in your home because most of your initial mortgage payments will go toward interest rather than paying down your principal amount.

Foreclosures

What is a foreclosed home?

A foreclosed home has been repossessed and is being sold by the mortgage lender. Understanding how the foreclosure process works is the first step in your decision to purchase a foreclosed home.

Lenders may begin the legal process of foreclosure when borrowers fail to make timely payments on their mortgage loans. They typically take a series of escalating steps, including notification of default on the loan and transfer of ownership. At that point, a lender may sell the home to recoup the outstanding mortgage balance.

Bank-owned homes are commonly sold at auction or listed for sale through a foreclosed homes website, but they may also be listed with a real estate agent.

The benefits of buying a foreclosure home

Some buyers are attracted to the idea of buying a foreclosed home in today’s competitive and high-priced real estate market. Here are several questions to consider if you’re one of them.

Are foreclosure homes cheaper?

The biggest advantage of choosing a foreclosed home is a lower sale price. Lenders generally aren’t interested in holding on to these properties, which tends to make them motivated sellers, especially if the property has been on the market for a while.

Is buying foreclosed homes a good investment?

Foreclosed homes often give buyers an opportunity to purchase a property below market value. That may help you build equity faster, which potentially makes them better investments than conventional homes.

Do foreclosed homes require a lot of renovations?

Foreclosed homes are typically sold in as-in condition, meaning they might need varying levels of work before they are move-in ready. But if you’re handy or willing to engage professional contractors, buying a foreclosed home may be a great opportunity to increase the property’s value, while also customizing it to meet your needs.

The cons of buying foreclosed homes

While buying a foreclosed home might be a great deal, there are two things to consider.

Additional costs

In some cases, you may not be able to conduct an inspection to evaluate the condition of a foreclosure home before a sale takes place. Similar to buying a fixer-upper, you should plan on setting aside money for home repairs and factor that into your budget.

Buyers of foreclosed homes may be asked to cover more of the costs associated with the purchase. For example, closing costs—which are typically paid by the seller—often fall on the buyer.

Liens

In addition, buyers must be aware of potential title issues. If the prior owner didn’t pay utility bills or property taxes, there could be a lien—a legal claim—on the home that must be cleared prior to settlement. Before agreeing to buy the house, it’s a good idea to have a title agent run a title search on the property to identify any existing claims.

Mortgage Calculator

$0.00
Monthly
  • Down Payment $0.00
  • Loan Amount $0.00
  • Monthly Mortgage Payment $0.00
  • Property Tax $0.00
  • Home Insurance $0.00
  • Monthly HOA Fees $0.00
$
%
%
%
$
$
%

Compare listings

Compare