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December 2013 News and Announcements

Deciding on a Mortgage Term

When considering mortgage options, most homeowners debate whether to obtain a 15-year or 30-year mortgage. However, lenders offer other terms, such as 10, 20, 25, or even 40 years. Even after obtaining a mortgage, you can typically lower the term by paying additional principal with your mortgage payment. So how do you go about deciding which is the best term for you?

There are three basic factors you should consider:

  • Since each term will have a different interest rate, you should review the rates for different mortgage terms. In general, shorter mortgage terms will have lower interest rates.
  • Also consider the monthly mortgage payment, which will depend on your down payment, mortgage term, and interest rate. Longer mortgage terms have lower mortgage payments. Keep in mind, however, that your equity will build slower with longer-term mortgages. Monthly payments for 15-year loans are typically 15% to 25% higher than 30-year loans, but your interest costs are typically half, since your interest rate is lower and the mortgage is paid off much sooner.
  • Your final consideration should be your financial plans. You want to select a mortgage term with a comfortable mortgage payment that will ensure you have money left over to save for other financial goals.

One option that gives you flexibility is to select a longer mortgage term, such as 30 years, and send additional principal in with your regular mortgage payment when you have the funds. Doing so can significantly decrease the term and amount of interest paid. However, you aren’t committed to making the additional payments, which gives you financial flexibility.

Please call if you’d like to discuss your options in more detail.

 Copyright © Integrated Concepts 2013. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

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