How to Choose the Right Mortgage Length for You

You have decided a fixed-rate mortgage loan is right for you.  Now you have to decide the length of the loan that is right for you.  That could be 10, 15, 20, 25, 30, or even 40 years.  There are a few key things to consider when deciding which is best for you.

The most important things to consider are the best interest rate you can get, how much the monthly payments will be, and how does the payment fit into your monthly budget.  The most important thing to remember when choosing the length of your mortgage is that it has to be affordable for you. 

The shorter the loan period the lower the interest rate will be.  This means you will save money over the course of a loan with a shorter loan period than a longer one.  What you have to remember, though, is that the shorter the loan period the higher the monthly payments regardless of the cheaper interest rate.  While it can be very attractive to think you can pay off your mortgage quicker and pay less interest you have to be positive you can afford the higher monthly payments.

For those that cannot afford a higher monthly payment a longer loan period should be considered.  While a longer loan period will raise the interest rate it will lower the monthly payments.  Remember, that while you will pay more in interest with a longer loan period that is more attractive than not being able to afford you monthly payments.

It is important when deciding what mortgage length to choose you take into account everything that could affect it.  You should always err on the side of caution and choose a longer loan if there is any chance you would not be able to make the monthly payments on the shorter loan period while staying current with all your other bills and expenses.  And remember, that you can always look into refinancing if your circumstances change later.  For more information about refinancing check out the article “When to Consider Mortgaging Your Home Financing Loan” on the mortgage info page of our website.