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Determining Which Mortgage Term Length to Choose


When you apply for a mortgage loan, one of the first questions your lender will ask is how long of a term you are interested in. The most popular term length chosen is 30 years, but there are also 15 and 20-year options. Some lenders offer other loan programs with different term lengths as well. When you are making your decision about which term length to apply for, there are a few points that you should consider.

The Mortgage Payment

As a rule of thumb, the longer your term length, the smaller your mortgage payment will be. This is because the principal repayment for the loan is extended over a longer period of time with a longer-term length. Most borrowers prefer a lower monthly payment, but if you can afford a higher payment, you may consider the other benefits associated with choosing a shorter term length.

The Interest Charges

The interest charges for a longer-term length can be considerably higher than with a shorter-term length, and this means that the shorter term length loans are more affordable over the life of the loan. It also means that equity will accrue more quickly in shorter-term loans. By using an online loan calculator with an amortization schedule, you can see how the interest charges accrue for shorter and longer-term lengths.

Your Future Plans

A final point to consider when trying to decide which term length to choose for your mortgage is your future plans. A shorter-term length may be ideal if you are nearing retirement and want to pay off your loan before you reach retirement age. It may also be preferred if you want to build up as much equity as possible before you sell the home in a few years. Longer-term loans are often the preferred option if you have a tight budget and want to have extra cash on hand for other things, such as to pay off credit cards or simply to have wiggle room in your budget.

Choosing a term length for your mortgage is not something to rush into, and it is something that you should spend time researching and reflecting on. By doing so, you can make a more informed decision about which mortgage to apply for.

How to buy a home this year

How to Buy a Home This Year

If you are tired of renting and ready to make your move, now is the perfect time to buy a home. Housing prices are still affordable, interest rates on mortgages remain low and there is plenty of inventory to choose from.

Owning the roof over your head can be a dream come true, but it is important to make a plan before you make your move. You can buy a home this year, but the planning and preparation you put into the purchase will make a big difference.

Check the Direction of Interest Rates

The general direction of interest rates will have a direct impact on the interest rates mortgage lenders charge, so having that information can be a big help when buying a home. If interest rates are on the rise, locking in a low rate now and getting pre-approved for a mortgage could work to your benefit. If interest rates are expected to decline, waiting to buy could actually be a good move.

You can find information on interest rates and mortgage interest policies in the financial press, from traditional newspapers to modern websites. The more you know about interest rates, the easier it will be to time your home buying decision.

Research Local Neighborhoods

There is an old saying in real estate that you should buy the worst home in the best neighborhood, and there is a lot of truth to that strategy. Buying into an up-and-coming neighborhood, even if the home itself needs some work, could allow you to benefit from a future appreciation and ultimately make a profit should you choose to sell.

Make a list of Must Have’s and Nice to Have’s

Whether you are shopping for your first home or looking for something nicer than what you have, it is important to think about what you must have and what you would like to have. Separating your wants from your needs can make shopping for a home a lot easier, saving you a lot of time and potentially a lot of money as well.

You might like to have granite countertops, but if the price is right, butcher block may work just as well. You may crave hardwood floors, but if the home is perfect in every other way, a little carpet should not stop you from making an offer.

Set Your Budget and Factor in Interest Rates

If you want to buy a home this year, you will first need to determine how much you can afford to spend. It is important to set a realistic homebuying budget, one that includes not only the monthly mortgage payment but the cost of repairs and upkeep as well.

You can download and use The Directions Home Loan App (https://myhomeloan.directionshomeloan.com/borrower/signup/easton@directionshomeloan.com) to estimate your monthly payment, but you will need three critical pieces of information to make it work. You will need to know whether you prefer a 15-year or 30-year mortgage, the price of the home, the amount of down payment you will be putting down, and an idea of what you.

You can do your homework and get the first three, but you will need your lender’s help to determine the interest rate you will likely have to pay. The interest rate on your mortgage depends on a number of factors, from the overall level of interest rates to your own credit score. Finding this information now can make your home buying easier, so be sure to check with your chosen lender.

Buying a home takes planning and preparation, and the sooner you get started the better off you will be. If you plan to buy a home this year or next, you will need to think ahead, and now is the perfect time to get started by contacting Direction Home Loan at www.directionshomeloan.com.

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