Walking through the door of your first home can be thrilling. In order to finance the purchase of your perfect home, you will likely need to secure a mortgage loan. These loans come with varying terms that allow buyers to customize their mortgage to meet their needs.
One of the terms that you can customize when securing a mortgage is the number of payments you must make to pay off the principle and interest. Typical repayments terms are 15 years and 30 years. Think carefully before deciding which repayment period best meets your needs.
30 Year Mortgage
A longer repayment term comes with some unique benefits. Because the balance of the loan is spread out over a longer period of time, the monthly payment amount associated with a 30 year mortgage is typically lower that the monthly payment on a loan with a shorter repayment period.
This lower monthly payment can leave money in your budget for personal savings, the repayment of student loans, and funds to reduce credit card debt.
If having extra cash left over at the end of the month is important to you, then a 30 year mortgage will be your best option. Just keep in mind that you will end up paying more in interest costs over the life of a 30 year loan when compared with other mortgage products.
15 Year Mortgage
There are some benefits to securing a 15 year mortgage as well. The shorter repayment term of a 15 year mortgage will result in higher monthly payments, but it will also produce a lower overall total when it comes to the amount of interest you will pay over the life of the loan.
More of your monthly payment goes toward paying down the principle balance of a 15 year mortgage. This helps you build equity in your home much faster. The equity can be leveraged to help you pay for home improvements or other major expenses in the future.
There are benefits and drawbacks to both 15 and 30 year mortgages. A 30 year mortgage will be more affordable in the short-term, reducing monthly payments and alleviating your monthly financial burden. A 15 year mortgage lets you pay off your home faster and build valuable equity that can be used to help reduce financial hardship in the future.
Weigh the pros and cons of both mortgages, then work with an experienced brokerage, like Cornerstone Residential Mortgage, to select the right mortgage to meet your needs.Share
1 February 2019
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