30 Year And 15 Year Mortgages
You hear this all the time. Mortgage officers ask you about it so that they can submit your application for approval. The difference is significant enough to warrant a huge jump in commissions for the officer attending to you.
Do you want a 30 year mortgage term or a 15 year mortgage term?
30 Year vs. 15 Year Mortgages
The most common objective of any mortgage applicant is to obtain a high quantum of mortgage loan with the lowest monthly payments. Only then does the home buyer think about getting the lowest interest rates. Monthly payments are short term benefits, while getting the best interest rates will be more beneficial in the long term.
If you noticed, the 2 objectives have an underlying term. Depending on where you are located, the term can also be referred to as the tenure. Or length of mortgage loan.
The length of a mortgage loan is essential to your financial means. Firstly, it is a decision to commit to a monthly payment for a number of specified years. This can put a strain on your own wealth building goals. Secondly, how long is the length of the mortgage determines how much interest you eventually pay for your mortgage loan. These are very big factors that can determine your financial well-being.
The most common behaviour of mortgage loan applicants to stretch out the tenure for the mortgage so that they will pay a lower monthly payment. So do note that the more you stretch out the loan, the more interest you will eventually pay. This can give you nightmares in the long term.
When people are determined to obtain the best interest rates, common sense tells us that that is a very good decision. However, most are not aware of the idea of significantly shortening the loan tenure to save on the TOTAL interest payable for the mortgage loan.
How you decide on your choice of loan tenure really depends on your personal financial situation and goals. You have to assess whether you can handle a higher monthly payment if you want to save a significant sum on the loan interest. And also look at whether having a lower mortgage monthly payment is really necessary for you. If you have that extra cash and just feels like keeping it, you can consider using it for your mortgage loan by increasing the payments so that you save on the mortgage interest.
So take the time to evaluate the terms of your mortgage. Don’t depend on a loan officer. Your mortgage concerns you. You cannot expect someone else to look out for you best interest when they are compensated for selling and closing you a mortgage deal.