Mortgage Terms and What Is Best For You
Mortgages can seem daunting and slightly terrifying, especially if you’ve never bought a house before. Knowing how to navigate the ever-changing world of home buying can seem impossible, and it’s always important to take a look at the market and see what the current mortgage rates are.
Not only is it vital to get as low a rate as possible on a mortgage, it’s also extremely important to decide on a mortgage term that works for you. The term is the length of your mortgage and is an extremely important factor, as the rate you’ll receive depends on how long your mortgage is.
What Terms Are Available?
When it comes to mortgage terms, there are lots of possibilities. The best option for you typically depends a number of factors — mostly what you can afford. The standard mortgage term is 30 years, meaning that most mortgages are paid off in fixed payments over a 30-year period.
While most mortgages are fixed over the course of the term, some 30-year mortgages don’t have fixed payments. Some have adjustable rates — most notably the 5/1 adjustable-rate mortgage. This type of mortgage is fixed over 30 years but is adjustable after just five, meaning that it can be adjusted for 25 years.
There are other terms available as well, notably the 15-year mortgage term. This is a viable option for a number of reasons, but should be considered carefully as well. A standard 15-year mortgage is fixed and paid off in 15 years, but the monthly cost is higher than it would be for a 30-year mortgage.
The good thing about a 15-year mortgage is that it typically carries a much lower mortgage rate than a 30-year mortgage, plus you pay much less in interest. This is because a shorter term on your loan means less risk for the lenders.
There are a number of other options available for mortgage terms, including 40-year terms and other types of 15 and 30-year terms. The thing to remember is that the longer the term, the more interest you’ll pay. With this in mind, a 15-year term might be a good option. Just know that your monthly payments will be higher, so it’s important to make sure you can afford the cost.
What To Remember About Mortgage Rates
Terms are important to consider, but how long your mortgage exists won’t mean much if your mortgage rate doesn’t line up. Mortgage rates fluctuate pretty often, so keeping tabs on the most current rates is important to anyone buying a home or refinancing their mortgage. If you’re unsure as to why mortgage rates fluctuate so much, it’s because of a number of important economic factors.
Inflation is a big factor, as is economic climate. Typically, mortgage rates will tend to increase as the economy does better because the demand for homes increases. This goes hand in hand with another factor — housing market conditions. If the housing market is in good shape, meaning people are buying homes, mortgage rates will increase to capitalize on the demand for mortgages among buyers.
In the end, it’s important to be aware of the various factors that go into getting a mortgage. Figuring out a term that works for you, however, is a vital but often overlooked step that can have more ramifications than you’d think if you don’t run the numbers and decide wisely.