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Money Buzz 9/05

Longer-term mortgages, monitoring your 401(k) provider and more

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This story appears in the September 2005 issue of Entrepreneur. Subscribe »

Low interest rates have made 40-year mortgages relatively rarein recent years. "Now, as rates trend upward, you will see there-emergence of that product," predicts Jon Eberhardt,president of the California Association of Mortgage Brokers inSacramento, California. He notes that 40-year loan terms areusually employed in starter-home situations or used by people whowish to have a reduced payment option. "People use them tolower payments and qualify for houses they would otherwise not beable to buy."

The downside? Longer-term mortgages can be difficult to find,interest rates are .10 to .25 points higher than rates on 30-yearloans, and borrowers pay more in interest over the life of theloan. "You wouldn't want a 40-year term if you wanted topay down the principal," asserts Eberhardt. "Home buyersuse it to qualify for more [money] and get the lowest possibleinterest rate at the outset. Then, after three years, they changeover."

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