Mortgage News and Information
Loan Calculator

Which Mortgage Term is Right For Me?

Tagged as , ,
Posted on October 24th, 2013 by B Wood

choosing mortgage termOn average, most mortgage lenders advertise interest rates with a 30 year mortgage term. This leads many homeowners to assume that the only option they have is a 30 year mortgage. In reality, there are multiple mortgage terms you can choose from. Your mortgage term directly impacts your monthly payment, how much interest you will pay over the life of the loan, and when your mortgage will be paid off. Before refinancing or buying a home consider which mortgage term is right for you.

30 Year Fixed Rate Mortgage

This is the standard option for many homeowners. A fixed rate mortgage offers the peace of mind that comes from knowing your mortgage payments, and interest rate, will never go up. As long as you keep the same loan it will be paid off at a set date, 30 years from now. This is an excellent option for people that love their home and neighborhood, and want to stay in it for a long time.

20 Year Fixed Rate Mortgage

A twenty year mortgage loan is an ideal way to pay off your home faster. The shorter your loan term, the higher your monthly payment. A twenty year mortgage loan is more in line with how a lot of families plan their future. 30 years is a long time to stay in the home, where 20 years is what it takes to get kids through school and into college. By the time they leave the nest; your mortgage could be paid off.

15 Year Fixed Rate Mortgage

A fifteen year mortgage loan will have a significantly higher monthly mortgage payment. For this reason, many people cannot afford them. If you have recently paid off other debt, like car loans, it could be a good time to refinance to a fifteen year loan and keep your monthly bills at the same level. By simply applying the money you were paying on a car or credit card, you can have your home paid off in half of the time. People that are getting close to retirement age should definitely consider a fifteen year loan. Social security and retirement benefits will go a lot farther without a mortgage to pay.

10 Year Fixed Rate Mortgage

This mortgage term is not for the faint of heart. A ten year mortgage requires large payments and dedicated effort to have your home paid off free and clear. This loan term is ideal for people that are at the top of their earnings’s potential and planning on retiring in the near future. Families that will have additional expenses, for example, having another child, during the ten year should stick with a more payment friendly option.

Adjustable Rate Mortgage (ARM)

ARM loans are typically amortized over 30 year mortgage terms. The interest rate is typically fixed for 3, 5, or 7 years then adjusts based on a margin over the index (could be the LIBOR). Your mortgage lender will set the margin and identify the Index they are using. ARM loans can keep your interest rate and payment lower on a monthly basis. If you are planning on being in a home short term, this could be a good option for you. Do not select an ARM for your dream home that you want to live in forever. Rather, use an ARM to buy a starter home.

Call your mortgage lender today to discuss loan options, interest rates, and to determine which mortgage term is best for you and your family. Your mortgage should be part of your overall financial plan so have a strategy and make sure it helps you reach your goals.

All Rights Reserved - 2013 Directors Financial Group - Company NMLS ID 1060886 is an approved lending institution under the Federal Housing Administration (FHA) which is part of the U.S. Department of Housing & Urban Development (HUD). Loans on properties in California will be made or arranged pursuant to a California Department of Real Estate license #01815326. If we are unable to service your mortgage we will connect you with one of our associated mortgage bankers who can assist you. Interest rate, program terms and conditions are subject to change without notice. Certain restrictions and conditions will apply - not all applicants will qualify. Granting of loan is subject to credit requirements. NMLS Consumer Access