Home Loans
Mortgage Loan Basics: Mortgage Term Length
(presented by www.refinance-refinance.net - mortgage lenders)
By Louie Latour
Mortgages are the most intimidating aspect of home ownership. Choosing the wrong mortgage can cost you thousands of dollars and possibly one day, your home. You need to do your homework before shopping for a mortgage loan.
Term length is an important aspect of your mortgage. The term will determine how much you pay each month, how fast you build equity, and of course how long you have to repay the loan.
The term length you choose depends on your situation and your financial goals. Can you afford to pay more each month or do you need the lowest monthly payment possible? The more you pay each month, the more equity you will build in your home.
Mortgage terms vary from 1 year to 5 years to 15 or 30 years. There are even 20 and 40 year mortgages, though these are less common.
Short Mortgage Term Lengths
Mortgages with short term lengths come with much higher monthly payments. The good news is you will pay more to the loan principal and less to interest. Short term mortgages come with lower interest rates because there is less risk to the lender than mortgages with longer terms. Mortgages with 15 year term lengths are a popular choice for homeowners refinancing their mortgages.
A 30 year traditional mortgage will give you the lowest payments; however, you will pay a higher interest rate. The problem with a 30 year mortgage is you build very little equity in your home for a very long time. Mortgages are front-loaded with interest so during the early years of your loan little of your payment goes to pay back the principal balance. The advantage of this is you are able to deduct this interest from your Federal income tax.
You need to assess your financial situation and choose a mortgage term length that matches your financial goals. To learn more about mortgage terms and saving money on your mortgage download a free mortgage guidebook online.
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