Guide To Selecting The Right Home Loan Term

The right mortgage term for you, whether long or short, depends on a variety of factors. Here’s a look at the most common situations homeowners find themselves in and what works best for each.

For a First-Time Homebuyer

First-time homebuyers are mostly interested in keeping their monthly mortgage payment to the minimum. If that’s something you can relate to, a 30-year mortgage will be your best bet. Consult a real estate professional or a mortgage lender if your situation is unique.

For a Person Who’s Bought Homes Before

If you don’t mind a higher monthly mortgage payment, a 15-year mortgage will help you save interest. If you want to save interest and also lower your monthly payments, choose a 30-year mortgage, but make additional payments (each month) toward the principal.

Make sure to enquire about prepayment penalties before you opt for this course of action.

For a Refinancer

If you have a 30-year mortgage and have lived in your home for 10 to 15 years, you’ll have a lower balance left to pay off. This means you can realistically afford a 15-year term loan payment which will save you interest.

Just make sure to factor in the closing costs on your new loan, which can lower your potential savings.

For a Soon-To-Be Retiree

If you only have a few years of employment left, you’ll probably have concerns about living on a fixed income. Living without mortgage payments will give you more disposable income and help you maintain your current lifestyle. Consider a 15-year loan that you can pay off faster.