What is Ginnie Mae’s 40-year mortgage term?
If you’ve been researching your loan options, you may have heard the news that Ginnie Mae is launching a 40-year mortgage. What does that mean for homeowners and home buyers? Let’s explore.
Ginnie Mae’s 40-year mortgage is a loan term extension available to borrowers who are experiencing financial hardship. The agency offered a similar program called Hope for Homeowners in response to the 2008 financial crisis.
This new version is intended to help homeowners who were affected by the pandemic avoid default and foreclosure. The longer-term will result in lower monthly payments and make it easier for homeowners to afford their mortgage, enabling them to remain in their homes.
Investors will also be able to purchase securities backed by the modified 40-year loans. Since the mortgages are guaranteed by Ginnie Mae, these securities may make a good portfolio addition.
Who is eligible for the 40-year mortgage term with Ginnie Mae?
If you have a government-backed mortgage and are struggling to keep up with your payments, you may be eligible for a term extension.
To qualify, the original repayment period of your loan must be greater than 361 months but less than or equal to 480 months. This means that 15-year mortgages can’t be extended under this program. However, there are no restrictions regarding loan amounts. Your loan extension will also need to be approved by whichever government agency-backed your mortgage, whether that’s the FHA, VA, or USDA.
When will Ginnie Mae launch the 40-year term?
Ginnie Mae expects the loan extension program to be up and running by October of this year. At that time, investors will also be able to purchase securities backed by these mortgages.
The quick rollout of this program will help ensure that borrowers get the assistance they need as mortgage forbearance protections under the CARES Act come to an end. The maximum forbearance period of 18 months is approaching for many homeowners. And the last day for borrowers to request initial forbearance is September 30, 2021, just a few short months away.
What does a 40-year term mean for borrowers?
The main benefit of a 40-year mortgage for borrowers is lower payments. Adding ten extra years to your loan term could significantly reduce the amount you owe every month. If your income took a hit during the pandemic and hasn’t recovered yet, extending your mortgage can give you the financial breathing room you need.
If you’re exiting forbearance, switching to a 40-year mortgage can also make it easier to cover the cost of your missed payments. Instead of repaying your debt in a few months or as a lump sum, the amount you owe will be spread out over the entire loan. By extending the term to 40 years, your payments will be lowered to an affordable level even after the debt from your forbearance is factored in.
Although loan extensions can be a good option, they have a few downsides. You’ll usually pay more interest over the life of your loan because it has more time to accrue. It will also take you longer to pay off your mortgage, which could interfere with financial goals like retirement. However, for many, the benefits will outweigh the costs.
How to get a 40-year Ginnie Mae mortgage
The short answer is that we are anticipating the official launch of the Ginnie Mae 40-year loan product, and we will provide further information as it becomes known.
At OVM, we’re experienced in helping our customers through challenging financial situations and can often come up with creative solutions you won’t find elsewhere. So even if this doesn’t end up being the right program for you, we can brainstorm other ideas to help keep you in your home. If you want to learn more about this offering and additional options, contact our team of mortgage experts today!
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