Credits and mortgage page 89
What is the current 30 year fixed mortgage interest rate?
should I pay off my $50K mortgage balance (6%) with my home equity line of credit (4%)?
What Colleges/Universities go on a 4 Credit System?
I am thinking about BUYING a house?
How to change from a 30 yr mortgage to 15 year?
I know that a 30 year mortgage makes the monthly payments less which is more affordable but you end up paying more in interest. I'm planning to buy a house but not until years from now. I just like to be aware so that I know what I'm working for. I want to save and know what to expect. What about paying more on the mortgage payment, in that case is it best to get a 10, 15, 25 year mortgage or 30 year? It's confusing to me.
Find yourself a mortgage calculator on line somewhere and check out the various options. It should tell you how much interest you will be paying over the amortization period. That will give you the best answer without bias. Having figured this same thing out a few times, I will tell you that the best deal works at somewhere between 12 and 13 years. At that point your payments are not unreasonable and the interest is reasonably low. Something else to remember when you buy a house is that if you make bi-weekly payments instead of monthly payments the payback is much quicker. Again, run that through the calculator; don't just take my word for it.
What is best for YOU depends on YOU. It is always better to get the shortest period that you can afford as this will reduce the amount of interest that you will pay. In many high cost of living areas like Los Angeles, no one can really afford anything except a 30 year loan. If you live in a place like Iowa where it is cheaper, then a lower term loan is more managable
Obviously if you can afford the payments of a shorter term that is the better deal. However, most people buy as much house as they can afford - on the 30 year payment plan. One way of "having it both ways" is to pay additional on the principal with each payment. While it varies depending on the interest rate, a mere $100 per month toward the principal will pay off a 30 year mortgage in 25 years and save thousands and thousands of $ in interest. This has the additional benefit of leaving you with the flexibility of using that $100 for other things if you have the need - something that a shorter term loan doesn't give you. Of course, if you can afford more than the $100, the pay-off is even sooner. Good luck to you - home ownership is a complex and difficult problem, but very rewarding too.
The longer the term, the lower the monthly payment. And that is the only benefit of choosing 30 years, as opposed to shorter terms.
Honestly it is just a custom, you can make it as short as you want. In the US the longest the banks go is 30, in the UK 40 years is common practice.
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