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Figuring Out the Perfect Mortgage Length for You

A house is one of the largest investments that you will ever make in your life. This is why if you are planning to own and buy one, you have to gather as much knowledge as you can about what financing options are available for you. For most people, the best financing option that they can use in terms of buying a home will be a mortgage. However, after people figure out that applying for a mortgage is their best financing option to getting a home, they just end there. They fail to consider the length of mortgage that they should acquire that will be to their advantage. If you have plans to buy a home anytime soon or in the near future, figuring out the perfect mortgage length for you is essential. This brief article will give you some insights of some of the most common mortgage length options out there.

1. Conventional 30-40-year mortgage. Typical fixed mortgages have a term from 30 to 40 years. This mortgage length option is beneficial to most people as it offers a balance between monthly payment affordability and the rate of the paid interest. Moreover, since most mortgages have no penalties for prepayment, you have the liberty to pay additional amounts if you can in order for to better reduce the length of time that you will be paying for your mortgage. The downside to this mortgage option will just be that your interest and principal payments will be higher than the amount of money that you have borrowed. Even so, this can be resolved with your mortgage interest being tax-deductible.

2. 15-20-year mortgage. By lowering the length of your mortgage term, you will be paying a lower interest rate. And yet, this could also mean that you will be paying higher monthly rates and lower total payments.

3. 7-10-year fixed rate then adjustable rate mortgage term. If you want to stay in your current home for shorter time, then this is the mortgage term for you. You will pay lower rates and you will easily qualify for a certain amount that you need to set your mortgage terms with. The only downside to this arrangement will be right after the initial period where your rate will change if you decide to remain for a longer period in your current home. Perhaps, you can take another option and that is to refinance.

4. 1-year adjustable mortgage term. This kind of mortgage arrangement is one that has the lowest interest rates. However, it could entail to be the least predictable in the future. Nevertheless, if a person highly qualifies for this mortgage option, then this will do or if they are thinking of relocating early on, then this will still do.

5. Balloon/interest-only mortgage term. For a specified period of time, you can avail of interest-only mortgage loans. This mortgage term need not let you pay the principal amount, so you can expect your monthly payment to be lower. However, you could be putting your name and situation at risk since you will now be paying what you owe. Furthermore, you also have to make sure that after a specified time is reached, you must pay the full amount of the loan principle in full or if not, you better get another mortgage loan for it.