When financing a home purchase with a loan, deciding on the mortgage is one important decision you have to make. Many lenders offer 15- and 30-year terms, but there are also those who have 10- and 40-year loans. When choosing a term, it is advisable to know how the loan length affects your total payment and the size of the mortgage you can apply for.
Features of Mortgage Terms
One attractive feature of short loan terms is that you can pay off the loan and own the house faster. You may also have low-interest rates, but this also means having a higher monthly payment. If you choose a longer term, however, you can qualify for a larger loan than you could with a shorter term. The setback is you will need to pay more interest and pay the loan longer.
The Common Loan Term
Mortgage companies in Ogden note that many homebuyers prefer a longer term, as this will help them qualify for a bigger amount or have lower monthly payments. The main concern is the total interest expense over the life of the mortgage. If you’re considering a loan term, it is best to do your homework and learn more about overall interest cost. A loan calculator can help give you a rough estimate.
Your Situation and Goals
The right loan term will depend on your situation and financial goals. If you want a lower monthly payment or maximize the mortgage amount you can apply for, a longer loan term like a 30-year mortgage can work for you. If you have the income to pay for higher monthly payments or want save more interest, on the other hand, choose a shorter loan like a 10- or 15-year loan.
It is common for many homebuyers to choose the 30-year loan. If you’re thinking of doing the same, be sure to know its pros and cons. You can also choose a shorter-term to save more money and own the house faster, but make that you can afford the payments. It is best to talk to a reliable lender to know more about your options and make an informed decision.