Are Extended-Length Mortgages
Good or Bad for Borrowers?

Is this the solution for the cash-strapped home buyer: take out a mortgage loan and pay it back about half a century from now?

The 50-year home mortgage doesn't exist yet, though the idea is being seriously batted around among lenders as home price increases continue to far outpace income gains, making monthly payments on more traditional loans less affordable.

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

Ownit Mortgage Solutions, Agoura Hills, Calif., has rolled out a 45-year loan, mostly with variable rates, that it calls "the perfect alternative" to interest-only loans "for borrowers who desire affordable monthly payments."

Going the 45-year route isn't for everyone. Some analysts are skeptical that longer loans are necessarily beneficial to borrowers.

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 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, for 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 interest-only adjustable-rate mortgages.

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."

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