Trying to find the best mortgage for your needs can be tricky if you’re not sure what to look for. One thing you’ll want to consider is how long the loan will last. While everyone’s different, many people choose a 30-year option, as it is the average mortgage length. Some opt to do 15-year mortgage loans to pay off their home faster, which results in a higher monthly mortgage payment.
Terms Can Be Negotiated
Loans can be short-term or long-term options, with the length of the term usually right in the name. A 30-year fixed rate mortgage will span for 30-years or until it’s paid off. But loans can last any length of time that both the lender and borrower agree upon. Whatever the loan term is, your monthly payment is calculated so that you’ll eventually pay it all off over the course of the loan’s life. At the end of the term, your last payment will cover everything you owe, and this process is called amortization.
A loan’s term matters because it will affect how much your monthly payment is and your total interest costs. Many would love a 15-year mortgage because the interest is lower, but can’t pay the larger monthly amount. This is why they go with a 30-year term that extends the payback period, but it does mean that the interest rate won’t be quite as low. So as a result, you’ll eventually pay more for the convenience of spreading repayment out.
Take into account what sort of loan you’re considering. A fixed rate mortgage will have the same interest rate for the entire duration of the loan. You may be offered an average mortgage length, like a 30-year or 15-year term, but can ask for other lengths. If you refinance your loan, that term will end and you’ll have to abide the new refinanced loan terms.