Mortgages For Dummies: Mortgage
Term Length |
By Louie Latour |
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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.
Long Mortgage Term Lengths
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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