Mortgage question

[ShawnD1]

Suppose you have a 20 year mortgage on a 5 year term. When the 5 years is up, you should have 15 years left on your mortgage. Can you re-apply so the new mortgage is 20 years instead of 15 years?

Moved to OT

Fern
Super Moderator

 

[Fern]

Suppose you have a 20 year mortgage on a 5 year term. When the 5 years is up, you should have 15 years left on your mortgage. Can you re-apply so the new mortgage is 20 years instead of 15 years?

"Re-apply"? Not sure what this term means.

You could refinance it to any term you wanted, assuming a banks willingness..

Otherwise, assuming no problems, it should more-or-less automatically roll over to the next 5 yr period.

Fern

 

[chowderhead]

I think the standard are 30 year or 15 year mortgages. Are you talking about an30 year mortgage with a 5 year adjustment of the interest (ARM)? I know the first few years is just paying mostly interest so I am not sure you have knocked down much principal after 5 years. You can always refinance to another 30 year mortgage and run an amortization schedule to pay down your mortgage faster to in essence a 20 year mortgage with probably a lower fixed rate.

 

[ShawnD1]

I think the standard are 30 year or 15 year mortgages. Are you talking about an30 year mortgage with a 5 year adjustment of the interest (ARM)? I know the first few years is just paying mostly interest so I am not sure you have knocked down much principal after 5 years. You can always refinance to another 30 year mortgage and run an amortization schedule to pay down your mortgage faster to in essence a 20 year mortgage..

I was thinking about the housing market crash. The interest rates went up and people freaked the hell out. If you can no longer afford the payments on your 20 year mortgage, then maybe it could be stepped up to 30 years to make it possible to pay the bills.

 

[uclabachelor]

Suppose you have a 20 year mortgage on a 5 year term. When the 5 years is up, you should have 15 years left on your mortgage. Can you re-apply so the new mortgage is 20 years instead of 15 years?

Moved to OT

Fern
Super Moderator

Yes you can refinance but you'll end up paying some kind of fee, not to mention resetting your amortization table.

 

[rcpratt]

I was thinking about the housing market crash. The interest rates went up and people freaked the hell out. If you can no longer afford the payments on your 20 year mortgage, then maybe it could be stepped up to 30 years to make it possible to pay the bills.

Sure, you could always refinance if you wanted to. Usually people refinance to reduce the interest rate, but there's no reason you couldn't refinance from a 20yr to a 30yr, likely lowering your payment even if interest rates were higher than the initial mortgage.

Like others have said though, the reset in your amortization tables will mean you might end up paying more than if you had just used the 30yr fixed in the first place.

 

[Red Squirrel]

You can refinance if you want as mentioned. I don't think there's a fee but I guess this could depend on the bank. I think in most cases the fee is if you refinance within the 5 year term, so it's like breaking the contract basically.

 

[UglyCasanova]

You can refinance if you want as mentioned. I don't think there's a fee but I guess this could depend on the bank. I think in most cases the fee is if you refinance within the 5 year term, so it's like breaking the contract basically.

What exactly do you mean a 20 year mortgage with a 5 year term? Is it an ARM?

 

[ShawnD1]

What exactly do you mean a 20 year mortgage with a 5 year term? Is it an ARM?

Interest rates are set in short terms like 1, 3, 5 years. After 5 years they look at the market and your credit to offer different rates. My brother's mortgage has 5 years that are below prime. What happens after that is unknown.

 

[Venix]

I think he's Canadian, but most of the responses are based on US mortgages.

Canada has no concept of a 30 year fixed rate mortgage--after five years the rate will change. Most loans also have a pre-payment penalty, so refinancing is undesirable.

 

[TheSlamma]

Interest rates are set in short terms like 1, 3, 5 years. After 5 years they look at the market and your credit to offer different rates. My brother's mortgage has 5 years that are below prime. What happens after that is unknown.

That's called an ARM and not all loans are the same.

You can get 10,15,20 and 30 year conventional loans where the rate does not change for the entire term.

 

[TheSlamma]

I think he's Canadian, but most of the responses are based on US mortgages.

Canada has no concept of a 30 year fixed rate mortgage--after five years the rate will change. Most loans also have a pre-payment penalty, so refinancing is undesirable.

ugh.. man that is terrible.