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What Mortgage Length is Right for Me?


Shopping for a mortgage involves many difficult decisions, and one of the most difficult decisions is the appropriate length of the mortgage. When it comes to mortgages, there is no one choice that will be right for everyone, and it is important to make decisions based on your own unique circumstances, not just on the choices others have made.

Many people do not realize that when deciding about mortgage length there are choices beyond the well known 15 and 30 year home mortgage loans. In addition to these popular options, mortgages are also available in 10 year, 20 year and 25 year lengths. In addition, there are mortgages longer than 30 years, with some home buyers opting for a 40 year loan in order to qualify for the home they want.

These days, about 35% of all home buyers are opting for so called hybrid mortgage loans, those that offer several years of a fixed rate and then switch over to a variable rate mortgage. With all these choices to choose from, it can be difficult to pick the loan that is perfect for you.

When shopping for a mortgage loan, there are three important things to consider:

  • What is the best interest rate you can get?

  • How much will the monthly mortgage payment be?

  • How does that payment fit into your monthly budget?

The most important issue should be that of affordability. It is important to strike a balance between the length of the loan and the size of the monthly payment.

It is also important to understand that shorter duration mortgage loans generally come with lower interest rates. Therefore, choosing the shortest mortgage term that still provides affordable monthly payments usually provides the best deal.

It is important to carefully consider the various mortgage loans, and to understand the advantages and drawbacks of each approach.

The 15-Year Fixed Rate Mortgage

Generally speaking, the interest rate on a 15 year mortgage loan will be lower than on a comparable 30 year loan, but the monthly payments will be higher as well. While buyers may save on the interest, but it is vital that they are comfortable with these higher payments and they will need to ensure they have enough reserves to handle any unforeseen events such as sickness or job loss.

The 30-Year Fixed Rate Mortgage

The 30 year fixed rate mortgage loan is one of the most tried and true of all mortgage loans, and it carries the benefit of a lower monthly payment. Of course that lower monthly payment comes with a longer term, and that means you will be paying more interest in the long run.

The 40-Year Fixed Rate Mortgage

Before considering this type of mortgage, it is essential to be sure that it really makes sense for you. Some home buyers use this longer loan in order to qualify for a home, particularly in hot housing markets. However, it is important to weigh the benefits of buying a larger or more expensive home against the downside of paying a greater amount of interest than with either a 15 year or a 30 year mortgage loan.

In addition to these traditional lengths, there are a number of unique mortgage loan terms, including 10 year, 20 year and 25 year mortgage loans. Home buyers need to understand that not all lenders offer these types of mortgages, and you may have to do some shopping around to find one that meets your needs.

In addition to these fixed rate mortgage loans, there are a number of hybrid loans, such as the hybrid adjustable rate mortgage. These hybrid loans provide the borrower with a fixed rate loan for a set period of time, most often one, three, five, seven or 10 years. After that initial fixed period is over, the loan reverts to an adjustable rate mortgage loan. While this adjustment can be great when interest rates fall, it is less attractive when rates are rising.

These hybrid loans can be a good choice for many first time home buyers, and for those homeowners who are planning to be in their homes only for a short period of time. The idea is that the homeowner will be able to resell the home while he or she is still within the initial fixed loan period.


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