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Determining the best length for your mortgage

by chang / Monday, 27 August 2018 / Published in mainwp, News

A mortgage is most likely the largest loan you’ll ever have!  It’s rather important to be sure that you’re getting the best terms on it as a slight misstep can result in additional thousands of dollars in interest over the life of the mortgage.

The largest variable in a monthly payment isn’t based on credit score, but rather on the length of the mortgage. For example: a 15-year mortgage gets paid off in half the time of a 30-year, but the amount you pay monthly will be a lot more.

Note that though the payment will be much higher on a 15-year term, it won’t be double because by shortening the time period, you lower the total interest you pay too!

Most mortgages are based on a 30-year amortization, but not all 30-year mortgages are fixed for 30 years. A common example would be the 5/1 adjustable rate, which grants a fixed rate for the first five years, but switches to adjustable after that.

15-year mortgages are also very common, though they require much higher monthly payments. However, it can result in huge savings due to the lower interest. Not everyone can take on a 15-year term, due to higher monthly payments, a 15-year amortization can result in your budget stretching thin.

There are several more, much rarer mortgage terms that include 10, 20, 25, and 40-year terms, but not all banks and/or lenders offer these options.

How long you plan to keep the home also plays a big factor in deciding on the best term. Keep in mind that most people only hold onto their mortgage for, on average, 7 years; a result of either selling their property, refinancing their mortgage for lower rates or to get cash out.

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This licensee is performing acts for which a real estate license is required. C2 Financial Corporation is licensed by the California Bureau of Real Estate, Broker # 01821025; NMLS # 135622. Loan approval is not guaranteed and is subject to lender review of information. Loan is only approved when lender has issued approval in writing. Specified rates may not be available for all borrowers. Rate subject to change with market conditions. C2 Financial Corporation is an Equal Opportunity Mortgage Broker/Lender.

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