Forum: money.stackexchange.com
Tags: <united-states><mortgage>
Title: Is it possible to get a mortgage with a custom duration in the US?
Question: I live in the US and it seems that mortgages rates here are always quoted for either 15 or 30 years. Is it possible to get a mortgage in the US that is for a different duration? Say I have 23 years until I plan to retire, can I get a 23-year mortgage that would fit nicely into that timeframe?  If not, why the lack of flexibility?

Answers:
sents: text: Maybe from a Credit Union or other smaller bank, but not a big-box bank.
text: why the lack of flexibility?
text: There is a huge secondary market for mortgages through the MBS (Mortgage-backed Security) market.
text: This market consists of millions of mortgages that have sold by banks to other institutions, that package thousands of them together into "bonds" that are then bought by investors.
text: The characteristics of the bonds inside are summarized by tenor, credit rating, etc.
text: so investors know what they're paying for.
text: Throwing 23-year mortgages into the mix would disrupt the models that investors use, making the bonds less marketable.
text: Since the overhead for making a "custom" mortgage would be relatively high, they just don't offer it to the public.
text: It's not worth their time.
text: A small local bank or credit union, however, might be more willing to accommodate custom needs (or come up with an alternative).
text: However, I would not expect that you'd pay an "interpolated" rate.
text: You may end up just paying the 30-year rate with a custom payment amount.
text: Just get a 30-year mortgage and make extra payments to pay it off early.
text: Or get a 15-year loan, pay less interest and pay it off even earlier!
answer_details: author: money.stackexchange.com/users/5363/D Stanley
score: 26
sents: text: My credit union offers 10, 15, 20 and 30 year mortgages.
text: So there are ones available besides 15 and 30 years.
text: The issue for the banks and credit unions is that if they let a customer pick their duration the correct setting of interest rates becomes more complex.
text: The ones with non-standard duration's may also be harder to sell to investors.
text: One approach you can take is to get a 30 year mortgage, but then pay it off as if it was a 23 year mortgage.
text: You can use a spreadsheet or online mortgage calculator to determine the monthly payment to get it paid off in 23 years.
answer_details: author: money.stackexchange.com/users/5414/mhoran_psprep
score: 13
sents: text: I've worked for a few mortgage banks and they'd all be happy to give you a 23 year mortgage.
text: Googling "custom mortgage term" returns pages from several other mortgage banks that offer the same.
text: I'd wager that just about any large player in the mortgage market would be able to give you a custom term.
text: It's not a hugely popular feature, though, because you're not likely to end up with a rate below the 30 year rate and you'd get the same result with a 30 year mortgage that you simply prepay a bit each month.
text: Particularly when you're looking for slightly non-standard terms, I'd suggest talking to a local mortgage broker that can get you quotes from a number of different mortgage banks so that you can more easily compare the various custom term programs.
answer_details: author: money.stackexchange.com/users/73607/Justin Cave
score: 5
sents: text: Is it possible to get a mortgage in the US that is for a different duration?
text: Yes, 15 and 30 year fixed rate mortgages are the most popular, but they are not the only options.
text: Many banks also offer 20-year and 10-year fixed rate mortgages.
text: There are also a host of hybrid loan options (7/1, 5/1, 3/1 ARM).
text: 40-year mortgages have all but vanished, but you might still be able to get one.
text: Say I have 23 years until I plan to retire, can I get a 23-year mortgage that would fit nicely into that timeframe?
text: Yes, while your local bank/credit union may not offer/advertise a custom length mortgage, you can certainly get one.
text: Companies like Quicken Loans advertise custom lengths (I think minimum 8-years).
text: The most popular mortgage lengths have varied over time.
text: I've heard that the 20-year is gaining ground but haven't found good data to support the claim.
answer_details: author: money.stackexchange.com/users/52448/Hart CO
score: 4
sents: text: There is little need, as you can always overpay or payoff early.
text: Basically, if you want a 23 year mortgage, you take a 30 year, and simply overpay each month a bit, and after 23 years it happens to be paid off.
text: The exact amount is not basic math but not too difficult either to calculate, the web is full of calculators.
text: You also have the extra advantage that you can skip the overpayment at any given time (if there is an emergency), or increase it if you have more money.
text: If you would have a fixed 23 year mortgage, you must pay (at least) the agreed amount every month.
answer_details: author: money.stackexchange.com/users/35405/Aganju
score: 2

Summary of the answers:
You might be able to do this with a smaller bank. This would count as a custom mortgage which would cost more for the bank to offer.
The overheads for making a "custom" mortgage would be relatively high, so they are not offered to the public. A Credit Union or smaller bank might be worth approaching. Another approach is to take a 30 year mortgage, but then pay it off as if it was a 23 year mortgage by overpaying each month.