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.
