I've been reading some news about 'keeping the 30 year mortgage'. I assume this means that some believe it should go away. If it did go away, what would likely replace it?
Should Fannie and Freddie lose their governmental sponsorship and mortgages return to the private sector, it's highly likely that lenders and bond buyers will not commit to 30 year fixed rate mortgages. The most likely options will be shorter fixed terms, ARM's, or perhaps even balloon notes. Each of those scenarios take the risk of guaranteeing interest rates for 30 years away from lenders, and put the risk of increased future rates on borrowers. Even if 30 year terms are still available, expect them to be at a premium price, just as a 7 year car loan may carry a higher rate than a 3 year loan.
I read an piece from somone at the MBA a week or so ago about how different loan terms are starting to compete with the 30 year. I don't feel like anything would replace the 30 year mortgage, and while it talks about the 20 year being the most popular outside the 15 and 30, the article doesn't say anything about 40 years, which I've heard from others in the community are gaining some momentum. Has anyone heard anythign about 40s? I'd be interested to know. I can't speak for ARMs, but everyone I've spoken with is nervous about financing into an ARM due to (in my opion) lack of understanding.
Here's the article I read: MBA Analysis: New Products Emerging in Fixed-Rate Universe - Brennan Zubrick
Go to England, they will think you're insane if you ask for money fixed for 30 years. 5/1 Hybrid is what they call a "fixed rate mortgage" across the pond. Good product with an unfounded bad reputation. I have a 5yr ARM on my personal home and will never have anything but in the future. The key is understanding the risk/reward and properly planning for various outcomes. Then again, we may never do away with the 30 yr FRM....who knows anymore?!?!