Fixed Rate Mortgages - Choosing a Repayment Term
A Home Buying Article Contributed by Mark Vanner
Fixed Rate Mortgages - Choosing a Repayment Term.
When buying a new home, one of the first decisions you will need to make concerns the length of time you wish to be repaying your home mortgage for. Standard fixed rate mortgages will generally offer you two choices, either a fifteen year mortgage or a thirty year mortgage term. For home buyers looking to live in a property indefinitely, the fifteen or thirty year term is the mortgage of choice. However, choosing which mortgage term best suits your own needs can sometimes be a difficult decision.
The Thirty Year Mortgage.
The thirty Year mortgage is the most popular choice amongst American consumers as the lower monthly repayments are often more appealing despite interest rates being higher. Because of the lower monthly repayments this option is more accessible to people on lower incomes making qualification a little easier than the fifteen year fixed rate mortgage. Monthly repayments are calculated on the initial interest rate at the beginning of the term and will not alter throughout the life of your mortgage.
Because the mortgage repayments on a thirty year loan are less than a fifteen year term this option is often the more affordable choice. If however you decide during the life of your thirty year mortgage you wish to contribute extra payments to speed the repayments along, you can do this without penalty.
The Fifteen Year Mortgage.
Many home buyers are often reluctant to choose the fifteen year mortgage option
due to fears of being unable to meet the higher monthly repayments. But there are a number of advantages for choosing this option which are often over looked. Although it is true that the monthly repayments are higher on a fifteen year mortgage apposed to a thirty year mortgage, the interest rate is actually much lower, offsetting part of the overall monthly repayments.
Although to qualify for this option you will need a higher rate of income, if you feel you can afford this option, the obvious advantage to the fifteen year mortgage is that your mortgage will be paid in half the time of a thirty year mortgage allowing you greater financial freedom at the end of the fifteen year term.
How Much Can I Afford? .
Of course every new home buyer would prefer to be able to pay off their home mortgage in the shortest time possible, freeing themselves of any excess expenditure and instead using the money to finance a child through college or simply putting it aside as savings for the future. When choosing between mortgage terms you need to work out exactly how much you can afford to spend monthly.
Many home buyers now begin on a thirty year mortgage term until they feel they can afford a higher rate of repayments before transferring to a fifteen year mortgage. However the majority of home buyers in the United States will be destined for the lengthier mortgage term due to afford-ability and the flexibility that a longer term mortgage can offer.
