What Length Fixed Mortgage Is Best For You?


In today’s historically, low – interest environment, the vast majority of home mortgages, issued, are of the fixed – rate variety. In most instances, individuals want to lock – in these low rates, for the entire term of their loan, and therefore, opt to proceed, in that manner. Once you determine you are better served, using this type of mortgage, rather than a variable type, and you qualify, you must decide, which term, and/ or length, is best for your needs, conditions, and/ or situation. This article, therefore, will briefly discuss, which length, makes the most sense, for you.

1. 15 Years, or less: The main advantage of this term, is the interest rate, is almost – always, lower than longer – term, ones. Fewer payments over less years, combined with lower rates, translates to far lower, total payments. One’s asset accumulation grows more quickly, and payments go, far faster, towards paying – down principal, rather than simply, paying interest. However, there are also some draw – backs, or limitations, involved. One of these is they require possessing a higher income, less overall debt, and others assets, to qualify. In addition, the monthly installment payments, are obviously higher, because of the shorter – term/ period.

2. 20 – 25 Years: These are generally used, as a compromise, and/ or middle – ground, which stands between the shorter (15 years, or less), and longer – term mortgages. Although interest rates may be slightly lower than longer – period, ones, they are generally a little higher than shorter ones.

3. 30 Years: Traditionally, the 30 – year, length, is the most commonly used, type of mortgage. Although the interest rate may be a little higher, today, these rates are still, historically low. They generally provide an excellent opportunity for qualified individuals, to acquire the necessary financing, needed, to purchase a home. Especially in today’s market, where home prices have been rising for a couple of years, they often provide the best option available!

4. 40 Years: This extended term was rarely used, until recently. However, with the increasing prices of houses, extending the number of years, to repay, lowers monthly installments, even though it increases the overall payments. Since qualifying for a mortgage is based on several factors, including percentages based on that monthly installment, obviously, this term, makes it easier for some, to be able to qualify.

Deciding which term, and length, of a mortgage, is an individual decision, based on several factors, including financial, one’s comfort zone, monthly, as well as overall total costs/ expenses. Which length do you think, might best serve your needs and purposes, and why?


Source by Richard Brody


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