15-30 Year or bi-weekly The length and terms on a mortgage loan play an important role in a buyer’s ability to afford a certain mortgage structure. While traditional 30-year, fixed mortgages were the only option in the past, today buyers can selection from 15, 20 or 40-year mortgage terms as well, often with variable interest and down payment requirements. Understanding these options in detail can help you understand the full costs of financing a loan, as well as the various options for being able to properly plan over the long run. Before you close on a new home, it’s important to understand how a shorter or longer property loan term can affect your long run financial planning. Comparing 30-year and Shorter Term Home Loan Options While standard 30-year fixed rate mortgage have a wide range of advantages for many borrowers, shorter loans offer advantages by concentrating interest payments over a short period of time. The individual financing payments may be higher, but the financing costs of these options make the loans much more affordable. Opting for a shorter loan rather than a 3-year option can save thousands in interest payments – over a 30-year loan, the financing costs on the loan can total well into the hundreds of thousands, making a more concentrated loan more affordable when you factor in the interest compounding over an extended period. For example, a borrower on a $100,000 loan could save impressive amounts of payments on a 30-year relative to a 15-year loan. For those who can afford a shorter borrowing cycle, paying off your home in less time can add up to substantial savings in the overall ownership costs on your home. Although 15 and 20-year loans are increasingly preferred by many home buyers, a common 30-year structured loan can be more predictable for those who are uncertain about their future income earnings potential. In an uncertain job market, a longer loan cycle can make individual payments more affordable and allow for some savings against unexpected health and miscellaneous costs that can arise. Properly budgeting over the long run requires a full evaluation of the financing options linked to a home loan. Working with a professional real estate consultant from Prime Source can provide buyers with the necessary insights into the buying process so you can more effectively evaluate the options for borrowers to select between various lending options over time. Evaluating Bi-Weekly Mortgage Opportunities One additional option many borrowers have is to opt for varying payment periods, in addition to considerations about the term of the loan itself. Many borrowers opt for bi-weekly payments rather than monthly which can help to save in interest costs, make planning easier for those who want to link payments to their income cycle and can often help structure an overall more affordable financing process. While bi-weekly payments may not be for everyone, they can add a degree of organization to the loan that goes well beyond the basic structure of monthly payments and can help make the overall financing process substantially more affordable over time. Making additional payments can give you flexibility to pay off a loan early, potentially saving you substantially in interest payments over time as well. How to determine the ideal financing terms on real estate loans For most property borrowers, there are a wide variety of borrowing options on mortgage loans. Sitting down with a real estate professional from Prime Source can help you to effectively evaluate which term loan is in your best interest. Financing your real estate loan should be an organized, affordable process that offers more options for borrowers, helping you to plan to integrate a long run property investment into your future.
ShareThis