Shorter Term Mortgages Equal To Better Savings
The greatest feat the mortgage industry ever achieved was making the American public think that the 30-year fixed home loan is the best option for every person. Today, America, you'll learn the truth€¦
The primary mortgage term that's referenced in the media and most mortgage literature is the 30-year fixed mortgage loan. However, it's not the only fixed mortgage loan term available; lenders also commonly offer 5, 15, and 40-year loans; those terms just aren't often advertised. Why the different loan terms? Well, the pitch to consumers is that a 30-year or 40-year mortgage is more affordable. That's actually true€"in part. The lengthy mortgage terms make mortgage loan payments more manageable in the present. When you look at the overall cost of the longer mortgages though, you'll quickly find that they're very expensive! That's not the case with the 5-year and 15-year mortgage loans. Shorter mortgage loan terms such as these actually save you tens of thousands of dollars in the future, and only cost a little more in the present. How so? Well, you save on the interest you actually shell out over the years. You also save by qualifying for a lower mortgage rate when you choose a shorter mortgage loan term.
While choosing a home loan with the lowest mortgage rate helps to save on your mortgage, choosing a 15-year term will generate the greatest savings in the long run. To take advantage of the 15-year term, you may have to adjust the price point of the home you're looking to buy in order to afford the higher payments. For instance, if your original price point was a home of $240,000 because that was affordable to you based on a 30-yr mortgage at 5% mortgage interest rate, consider looking at a maximum home price of $200,000 and choosing a 15-year mortgage at a 4.5% mortgage interest rate. Doing so will result in a similar monthly mortgage payment€" $1,288.37 / mo. for the 30-year mortgage or $1,223.99 / mo. for the 15-year mortgage€"and, you'd save tremendously in interest. Oh, and if you're concerned about finding a home with the amenities that you need at the slightly lower price point, don't be. If you hire a real estate agent to do the scouting for you, you're sure to find a great deal that will meet your standards!
Though loans with shorter terms will save you money in interest over time, shorter mortgage loans are not for everyone. They're best suited for those who are purchasing or refinancing a home they play to live in indefinitely, and that's simply because the savings in interest add up over time. Therefore, for the best long-term financial savings, a 30-year or 40-year mortgage loan should only be considered if you're buying a starter home or are not certain that you'll be in a home €forever.€
The primary mortgage term that's referenced in the media and most mortgage literature is the 30-year fixed mortgage loan. However, it's not the only fixed mortgage loan term available; lenders also commonly offer 5, 15, and 40-year loans; those terms just aren't often advertised. Why the different loan terms? Well, the pitch to consumers is that a 30-year or 40-year mortgage is more affordable. That's actually true€"in part. The lengthy mortgage terms make mortgage loan payments more manageable in the present. When you look at the overall cost of the longer mortgages though, you'll quickly find that they're very expensive! That's not the case with the 5-year and 15-year mortgage loans. Shorter mortgage loan terms such as these actually save you tens of thousands of dollars in the future, and only cost a little more in the present. How so? Well, you save on the interest you actually shell out over the years. You also save by qualifying for a lower mortgage rate when you choose a shorter mortgage loan term.
While choosing a home loan with the lowest mortgage rate helps to save on your mortgage, choosing a 15-year term will generate the greatest savings in the long run. To take advantage of the 15-year term, you may have to adjust the price point of the home you're looking to buy in order to afford the higher payments. For instance, if your original price point was a home of $240,000 because that was affordable to you based on a 30-yr mortgage at 5% mortgage interest rate, consider looking at a maximum home price of $200,000 and choosing a 15-year mortgage at a 4.5% mortgage interest rate. Doing so will result in a similar monthly mortgage payment€" $1,288.37 / mo. for the 30-year mortgage or $1,223.99 / mo. for the 15-year mortgage€"and, you'd save tremendously in interest. Oh, and if you're concerned about finding a home with the amenities that you need at the slightly lower price point, don't be. If you hire a real estate agent to do the scouting for you, you're sure to find a great deal that will meet your standards!
Though loans with shorter terms will save you money in interest over time, shorter mortgage loans are not for everyone. They're best suited for those who are purchasing or refinancing a home they play to live in indefinitely, and that's simply because the savings in interest add up over time. Therefore, for the best long-term financial savings, a 30-year or 40-year mortgage loan should only be considered if you're buying a starter home or are not certain that you'll be in a home €forever.€
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