Many homeowners are not aware that there are multiple mortgage terms available. Mortgage lenders typically advertise interest rates for a 30 year fixed home loan, without discussing other options. In truth, mortgage loans come in a variety of terms including: 30 year, 15 year, and 10 year terms. Not every lender offers the full range of options so working with a mortgage broker can help you to identify a mortgage lender that offers the exact term you need.
Before you secure a mortgage loan to refinance or purchase a home it is time to evaluate your financial goals.
Questions You Need Answered
1. Do you have extra room in your monthly budget or is it tight without a lot of room to spare?
2. Do you plan on having any children or other life changes that would increase your expenses?
3. How long are you planning on living in your home?
4. Do you need to remodel or expand your existing home?
5. Will you be using your home equity to do that?
6. Are you going to use your home equity to pay for your children’s college education?
7. If you are going to move, will you keep this home as a rental property?
8. When do you want to retire?
9. Do you want your home to be paid off prior to retirement?
The answer to these questions can help you decide what mortgage term to go with.
A 30 year mortgage term, with a fixed interest rate, offers the lowest monthly loan payment and is ideal for homeowners that:
• Do not have extra room in their budget. If you are worried about whether or not you can go to dinner – stick with a 30 year home loan.
• Plan on having more children
• Are considering starting a business, going back to school, or taking career risks.
A twenty year mortgage term is a good solution for people that want to pay off their home sooner but are worried about changing life events.
A fifteen or ten year mortgage term is ideal for people that want to pay off their home loan quickly. This applies to the following:
• Homeowners wanting to retire in the next twenty year.
• Those looking to turn their property into a rental that produces cash flow.
• People planning on using their home equity to pay for their children’s college.
• Borrowers wanting to remodel or expand their home in the future.
A fifteen or ten year mortgage term enables homeowners to pay off their home more quickly. Once a home loan is paid off you can still access your home equity in the future by taking out a new home loan. The benefit is that your largest monthly bill will be eliminated from your monthly budget. This gives you the opportunity to allocate those funds towards starting a business, paying for college, taking dream vacations, and more. It can also give homeowners the ability to retire without the need to replace their full working income.
Interest rates are lower than the ten year average, making now an excellent time to evaluate your current home loan. Speak with a mortgage banker, discuss your financial goals, and learn how your mortgage term can help you to accomplish them.
