Term of your Mortgage Repayment: 15, 30 or 40 Years?
Term of your Mortgage Repayment: 15, 30 or 40 Years
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How many years mortgage for your home loan is ideal? There is a slight debate in this regard. Where a few people suggest that smaller repayments over longer duration are beneficial, there are a few others who have the opinion that larger repayments over short duration are only beneficial. This debate however keeps on going but the main decisive factors are the loan amount and the rate of interest at which the loan has been borrowed.
A forty year loan seems to be a very long period and perhaps that could be one reason why people opt for a 30 year loan period. As mentioned earlier, if it is a 15 year term period for repayment of the mortgage, the money that goes towards the repayment every month is very high. One gets an opportunity to save some money if they go in for a 30 year term period because the repayment is lesser in comparison. But the main catch point here is that one ends up paying a very large amount as interest in the 30 year note. One pays significantly lesser interest if they fix their repayment on a higher margin than when compared to the 30 year term.
There are a few others who wish to clear off their home loan at the earliest possible time. They go in for a reduction in interest rates and opt for a biweekly payment. The money that goes once is split into two and is paid every two weeks. By making these half payments, one is able to save a considerable amount that goes off towards interest and at the same time, finish off the entire loan amount before the completion of 21 years.
Splitting the mortgage into two repayments has its own share of advantages. It is suggested to meet a good banker, a broker or a real estate expert who would be able to guide you through the entire process of explaining the different terms, interest rates and repayments. When you have a clear look at the figures you will be able to understand which option is going to be a better proposition for you so that you do not end up paying high amounts as interest.
