How to Choose the Length of Your Home Loan
Typically, mortgages are repaid over 30 years. However, this doesn’t mean that you are forced to repay your loan in 360 installments. Mortgage lenders do offer loan terms of 10, 15 and 20 years if that better fits your current and long-term financial needs. What should you consider when choosing a specific loan term?
Shorter Term Means Less Interest Paid
One of the best reasons to pay off a mortgage as quickly as possible is that you pay less interest to the lender. This makes the house less expensive overall, which may help to increase your return on investment. Furthermore, a shorter mortgage term means that you build equity in the home faster. Equity can be used to make improvements or as a down payment on another personal or income property.
How Much Can You Afford to Spend?
The benefit of a longer loan term is that your monthly payment will be lower than if you chose a shorter loan term. This is because the cost of the home is broken up into a larger number of installments. Lower payments can be ideal for those on a limited income or who would rather keep more of their money in a savings or brokerage account. Generally speaking, the rate of return on an index or similar fund is greater than the interest paid on a 30-year loan.
Do What’s Best for You
The best Las Vegas mortgage brokers will talk more about your loan term options and the pros and cons of both short and long-term mortgages. A broker can also talk about how a loan’s term could impact its interest rate. Ideally, you will choose the repayment period that best fits your needs and budget. If your needs change in the future, you can always look into refinancing your loan to get better terms.