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Buying a new home can be a nerve-wracking time – it can be tough to know if you are making all of the right decisions. Mortgage length is one of the primary concerns that prospective homeowners have. What term lengths are available and what are the advantages or disadvantages of each?
Typically, most lenders will offer two main mortgage lengths, 15 years and 30 years. A small few may also offer a 40-year term, but that is not the norm. There will also be other variables such as fixed interest rates vs. variable interest rates available within both term lengths.
The 30-year mortgage term is the most commonly chosen option. Borrowers who opt for this loan term will receive a higher interest rate than those who opt for the 15-year term and will pay more in interest over the life of the loan. However, one of the main benefits of the 30-year loan is the flexibility to pay extra towards the principal when you have some money left over at the end of the month. Doing this regularly can help to greatly reduce the length of time taken to pay off the loan. If you prefer to err on the side of caution when it comes to your monthly payments, the 30-year mortgage is for you.
15-year mortgage term
A 15-year mortgage term is not quite as popular as the 30-year term. In large part, this is due to the fact that a shorter loan term means higher monthly payments. For some, this higher monthly payment is offset by the lower interest rate you will receive on a 15-year loan. While the 30-year loan lets the borrower pay additional money towards the principal when they have the money, the 15-year loan effectively forces them to do so. If you are confident that you will be able to make the payments on the 15-year mortgage, you will have your home paid off very quickly with this option.
Whichever mortgage option you decide to opt for, remember to consider all additional expenses and factors when making your decision. With some prudent planning, you’ll be in the house of your dreams in no time.