Is a Shorter Home Loan Better?
The conventional mortgage consists of a 30-year term, fixed interest rate, and 20% deposit. However, things have changed since the late 2000s. Lenders offer several variations of the conventional mortgage. Plus, they offer a 15-year loan term too. Since the loan term is not as common as the 30 years, it’s normal to wonder if a shorter home loan is better.
When picking between 15 and 30 years, take into account if your finances can handle larger repayments. Let’s look at an example.
A $500,000 mortgage with a 3% interest and 30-year term renders a monthly repayment of $2,100. If you take the same home loan with a 15-year term, it renders a monthly repayment of $3,500. Thus, whether or not the shorter term is better depends on your finances first. If you can. handle a monthly repayment of $3,500 for 15 years, you will own your home outright sooner. That’s attractive to several homeowners. Moreover, you pay less. The 30-year loan renders a total mortgage of $756,000. The 15-year loan renders a total mortgage of $630,000. Since the interest rate clock ticks less, homeowners incur fewer charges.
However, some homeowners feel more comfortable with the lower repayment over twice the time.
The lenders handle the second step of this decision. Mortgage House is among the lenders that run through financial background checks. We ensure that we issue the terms that you can handle by employing several ratios including buffering.
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Shorter Home Loan Conclusion
For some homeowners, a shorter home loan is a better option. To explore your options, contact our Mortgage House loan specialists today.