Understanding the Time Frame of Your Mortgage on Long Island
If you’re in the process of buying a new home, you probably already know that one of the most important steps in the entire process is securing a mortgage. The purpose of a mortgage is to give home buyers funding for the house. The loan must be paid back at the interest rate written into the mortgage agreement. The lender takes ownership of the home if the buyer defaults on the loan, but the buyer owns the home outright once it’s paid off. A mortgage is an obligation that you’ll be living with for a long time, but the question is how long?
Popular Types of Mortgages
There are several types of mortgage loans out there and you’ve probably heard of the average mortgage lengths of 15-year or 30-year mortgages and loans of other lengths. Cliffco Mortgage Bankers has been in the mortgage business for more than a quarter of a century, so we want to share the pros and cons of different mortgage terms to help you choose.
The standard mortgage term is the 30-year mortgage. According to the Motley Fool, it’s considered a less risky option than shorter term loans because the payment is stretched out over a long period of time. This means that your interest payments will also be stretched out.
For those looking for a shorter-term loan, the 15-year mortgage is a popular option. This loan offers lower interest rates than you’d pay under a 30-year mortgage and you’ll build equity in your home faster. But the shorter term of the 15-year loan means you’ll be making larger monthly payments.
Factors to Consider in Choosing a Mortgage
So which is better, a 15-year-loan or a 30-year mortgage? That is a decision that’s based on personal preference, but there are a number of considerations that often factor into the decision. An article in TheStreet.com suggested some circumstances to consider. Your age and job can factor into the decision. While you might be able to afford the larger monthly payment for a 15-year mortgage right now, you may not be able to afford it down the road if you lose your job. There’s also a good chance you won’t qualify to refinance your mortgage into a 30-year loan if you’re unemployed.
Another thing to keep in mind is your overall financial picture. You may be able to afford the 15-year mortgage payment, but will you be able to put what you need into savings? Will you be able to max out your contribution to your 401(k)?
There are other mortgage loans of varying lengths. A 10-year mortgage gives you even more equity but even higher payments. A 40-year mortgage keeps the monthly payments lower, but the difference in monthly payments may not justify adding another 10-years to the loan obligation in comparison to the 30-year mortgage.
Let Cliffco Mortgage Bankers Explain Your Option
A final consideration to keep in mind when considering the length of a mortgage loan is that most mortgage loans allow you to pay off the principal early without incurring any penalties. You’ll still be paying higher interest rates, but you won’t be paying the larger monthly payment you’d get with a 15-year loan.
If you’re unsure of how long you want your mortgage to be, or even if you’ve made that decision, Cliffco Mortgage Bankers can help you understand your options. We’re committed to helping people achieve the dream of home ownership. Contact us today.