Is a Short Term Loan Better?
A shorter home loan presents an opportunity to save money and own a property outright sooner. Anytime a mortgage holder can reduce the principal amount owed faster, the home loan becomes less expensive.
If you obtain a $500,000 mortgage at 3% interest over 30 years, your monthly repayment equals $2,108.02. If you opt for the same loan terms over 15 years, your monthly repayment becomes $3,452.91.
A 15-year mortgage indeed carries a higher monthly repayment amount. However, you chip away at the principal faster. This means that you only accrue 15 years’ worth of interest rate charges as opposed to 30.
In our example, the total amount the homeowner pays over 30 years is an estimated $759,000 on a $500,000 mortgage. Over 15 years, the homeowner pays an estimated $621,000.
The difference of $138,000 is significant for many homeowners. It equals a home renovation, payment toward a child’s education, or a down payment on a second home.
To see how a shorter loan term changes a mortgage, check out our mortgage repayment calculator. Then you can speak with our Mortgage House loan specialists to obtain additional insight into this loan term option.
For some homeowners, a shorter loan term makes fiscal sense. It also makes sense for investors.
Shorter Home Loan Conclusion
Homebuyers and investors searching for a shorter home loan can obtain more information through Mortgage House. Our loan specialists have tools at their disposal to evaluate applications efficiently. Plus, they take into account the applicant’s financial goals. Talk with our team today.