Choosing a Mortgage Term

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How do I know how long to finance my mortgage?

Choosing a Mortgage Term

If you are looking into getting a mortgage and are interested in the best investment for your future, the term, or length, of the mortgage you choose can be an important factor. Here are a few tips on how to choose the term of your loan. First, will you be living in the property or renting/leasing it? If you will be residing in the house, how long do you anticipate living there?

If you plan on sticking around for a while, do not be afraid to take on a longer term mortgage. You will have a lower payment because of the extra time that you have and you will still be building equity in the property. If you plan on leasing the property, determine what you will be able to charge and then translate that into a payment. Rental properties make the most for you when you quickly pay down your mortgage. If you can charge enough for rent to help you shorten the term of the mortgage, than do so.

In the end, the term of your loan depends on how comfortable you are with a higher payment. Shorter loans have larger monthly payments because there is less time to pay off the total principal. However, this is a tradeoff that lenders make because a shorter term loan will usually have a lower interest rate. If you have a stead income and can afford to make larger payments, get a shorter term mortgage and own your home, outright, as quickly as you can.

   

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