One of the most critical decisions you will make when obtaining a mortgage loan is deciding on the term, or length, of the loan. While you can find a range of mortgage term variations, 30 and 15 year terms are the most popular. How do you know which one is right for you?
There are several things to consider when making this decision, such as:
- How long do you plan on staying in the home?
- How much can you afford to pay each month for the mortgage while still having enough to cover other expenses?
- How does the maturity date for the mortgage fit in with your financial goals?
Each term has its own benefits, which are listed below, that you will need to consider with your specific situation and financial goals.
30 Year Term
The 30 year mortgage is the most commonly used in America. It will have lower monthly payments than a comparable mortgage with a shorter term because the mortgage amount is spread out over a longer period of time. Due to the monthly payments being lower, you will have more disposable income to use for living expenses or to invest in a retirement or savings account.
It is often easier to get approved for a longer-term mortgage, and it can be easier on your monthly budget, which may make a 30 year mortgage an attractive option for you.
15 Year Term
A 15 year mortgage is one that is spread out over 15 years. The monthly payment amount will be a bit higher than if you compared the same mortgage amount with a 30 year term, but an important advantage with a 15 year term is that you will pay less interest over the life of the loan. This means you will save money over the long term.
If you want to own your home free and clear more quickly, save money on interest over the life of the loan, or if you do not plan on staying in your home long-term, a 15 year mortgage may be the perfect choice for you.
There is no right answer regarding mortgage terms. Be sure to seek guidance from your Mortgage Consultant to determine what option is best for your situation, and make the decision that will help you achieve your financial goals.
