One important thing you will need to think about when getting a mortgage, is the loan term. You will need to choose between a fifteen-year or thirty-year mortgage. While a thirty-year mortgage is inexpensive as far as monthly payments, a fifteen year mortgage will most likely be less expensive in the long-run. While you are thinking of both options, here are some things to consider.
How does a fifteen and thirty-year mortgage work?
A home mortgage is a home loan, which means that you are borrowing money for a set amount of years. You will need to pay interest and principal in accordance with the amortization schedule that your mortgage officer sets. This schedule will also involve property tax and homeowners insurance if these are included in your payment during escrow. If it applies, private mortgage insurance will be included when you purchase a home that you put less than twenty percent down on.
You will need to finish your checklist of mortgage docs.
You will need to pay one hundred eighty payments when you have a fifteen year home loan. Three hundred sixty payments will be needed for a thirty-year mortgage.
Why is it good to get a fifteen-year mortgage?
Your home will be paid off quicker.
The money you pay monthly will be a bigger amount, so this money will go to principal much quicker. The balance of your home loan will vanish rapidly. This should be a good consideration if you are thinking about saving up more money in your retirement fund.
Your interest rate will be low.
Since you are paying off your house quicker in fifteen years, your home loan will not be risky for the bank. Your interest rate will be smaller than a thirty-year loan. Although it depends on the interest rates overall, the fifteen-year mortgage interest rate will most likely be a half a percentage point or less than thirty-year loans.
Why should you get a thirty-year home loan?
You will pay a smaller amount each month.
You need to need to be great at mathematics to comprehend why a longer loan period could decrease your monthly payment amount. This looks good if you currently have other financial needs in mind. If you are receiving a bigger mortgage, you should be able to pay your loan over the thirty-year period.
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Your payment can be flexible.
You can decide to put in an extra payment here and there if you choose a thirty-year mortgage. You can go ahead of the curb and pay early.
You can save more on taxes.
Did you know a home loan is tax deductible? You are paying more interest if you have a fifteen-year loan. This may not benefit you if this is the case. Thirty-year mortgages can save you money on tax dollars.
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