Which loan term fits your needs
January 22nd, 2015
| Mortgage Options, Home Buying Tips
Getting ready to buy a home? Now is the time to be thinking about which type of loan term best fits your needs.
Most buyers take out a 30-year fixed-rate home loan. In fact, more than 80 percent of buyers select this option because of the low monthly payment.
The other main options are 10-year and 15-year fixed-rate loans.The big downside with these shorter-term options are the significantly higher monthly payment. With a 15-year home loan, for example, you can expect to have a 28 to 30 percent higher monthly payment than with a 30-year. And, you’re locked into paying that higher payment.
The main advantage of a shorter-term mortgage is the earlier payoff and substantial savings. You’ll pay your home off more quickly and pay tens of thousands – in some cases hundreds of thousands – less over the life of the loan.
There’s always the adjustable-rate option. Today’s ARMs are often based on a 30-year repayment schedule, with a fixed-rate period of five, seven or 10 years. After that time period, the rate adjusts. How high the rate can increase depends on the individual loan. ARMs are a way to get the lowest possible mortgage rate – their initial rates are usually lower than a 30-year mortgage – but they come with a significant degree of uncertainty. That’s why with rates so low on fixed-rate loans, many home buyers are deciding that ARMs aren’t worth the risk.
Have some questions about which type of mortgage is right for you? Give us a call. We’d be glad to help you!