Goose wrote:

BYOB, I do not know that it is true that most people could not get a 15 year loan, or would be forced to pay a huge downpayment in order to qualify for one. I think Tennyson is right on this.

Anybody out there with some expertise in this?

 
Before my current profession, I worked in the lending industry for almost 9 years.  During that time, I spent 6 months as a mortgage loan officer, that was at the beginning of the refinance craze in the early 2000's and saw how shady it was even then (bogus house apprasial's and no-income loans) and couldn't live with myself doing that so I quickly got out.

After that, I spent 6 years as a consumer loan officer (car loans, home equity loans, credit cards, personal loans) in 2 different credit unions.

Financial institutions will lend you money on a shorter term loan as long as you have the income to support those payments.  I have seen credit unions and banks give home equity lonas for 15 years up to 100% of the home value.

The vast majority of people were only interested in one thing when getting their loan, and that was how low will my payment be.  Very few people thought about the long-term implications of stretching out their loans (extra interest they are paying).  In the end, it all came down to how much car or home they could buy and still have the lowest possible monthly payment.

The smart people were the ones who changed their 30 year mortgages into 15 year mortgages.  They may have been paying more in the short-term, but now they probably have the mortgage paid off as long as they didn't refinance it again.

Does equity help you if you aren't going to sell your house? Isn't the only way to access the equity by basically re-borrowing the money or sell your house?

I know this may be hard to believe, but most banks and financial institutions make very little money off collecting the interest on loans.

Most mortgages are bundled and sold by banks shortly after they are bought as "mortgage-backed" securities, letting someone else take the risk for these loans.  It came to be a more stable way for the smaller and medium sized banks to guarantee a return on their money without risking default.

In fact, most banks would prefer not to deal with mortgages at all, as business customers are where they make their income.

Most car loans and home equity loans have their loan rates about 1.5% to 2% over treasury rates or the interest rates they offer at their financial institution.  Now if you have less than perfect credit, your interest rate will be higher due to the higher risk of default.

I'd say at least 20 years, if not slightly longer.

My first job in the business over 15 years ago was to review loan files after the "closing" of the loan to make sure everything was in order and if not, to fix what was wrong, so the loan could be bundled and sold to either a gigantic bank or Fannie/Freddie.

Obviously if you can pool tens of thousands of mortgages into one financial instrument it should theoretically be more secure and financially stable then a small or medium sized bank risking a local collapse of some sort.

It just makes more sense for smaller institutions to sell the loans and guarantee themselves some income rather than risk default of a high percentage of mortgages when they are working on small margins.

Brady Bunch wrote:

I'd say at least 20 years, if not slightly longer.

My first job in the business over 15 years ago was to review loan files after the "closing" of the loan to make sure everything was in order and if not, to fix what was wrong, so the loan could be bundled and sold to either a gigantic bank or Fannie/Freddie.

Obviously if you can pool tens of thousands of mortgages into one financial instrument it should theoretically be more secure and financially stable then a small or medium sized bank risking a local collapse of some sort.

It just makes more sense for smaller institutions to sell the loans and guarantee themselves some income rather than risk default of a high percentage of mortgages when they are working on small margins.

Another question (Sorry). Do the banks tell the home owner when the loan is sold?
I got my mortgage from a small local bank in Western Massachusetts. I still send the payments to the same address, so I figured that the local bank still owned the loan. Am I safe in that assumption, or do they keep this the same to make me feel good? And, should I as a homeowner care if the loan is sold? Does it change anything from my end?