Getting a 30 Year Mortgage

2007-03-08 10:33:40

( Financial )



Getting a home is a very big decision. A lot of factors need to be considered on the mortgage you'll take. Most people go with a 30 year term as this works with most first time home owners. The monthly payments are just right for couples starting their families.

There are other options though. If you can still afford to make higher monthly payments, you might want to take a look at 15 year mortgage rates. Your mortgage has a 15 year term which means you'll own your home after just 15 years. Your monthly payment will definitely be higher though but your interest payments are almost cut by half, depending on the term. If you can afford this, you should definitely go for it.

For people with even higher incomes, you should go for a 10 year mortgage rate. 10 year terms are mostly fixed which means your interest rate does not increase or change within the term of the loan. Most 30 year mortgage rates are flexible which indicates that your interest changes depending on financial trends. A 10 year mortgage rate is also definitely lower because investors and lenders get their returns on a shorter period of time and there is also a shorter frame of time for defaults to occur. Monthly payment though, would definitely be steep.

For people with less income to spare might do well with a 40 year mortgage. Mortgage payments are stretched an extra decade compared with traditional 30 year terms. Some financial analysts say though, that the higher interest rate often just cancels out the benefit of paying longer, making monthly payments lower by just a minimal amount.

One basic rule of thumb in getting a mortage: the shorter the term, the less interest you'll end up paying, although you will have a higher monthly payment. If you can afford a shorter term, go for it.


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