What Length of Mortgage | Columbus Homes For Sale

15-Year, 30-Year, or a Biweekly Mortgage?

In the past, the 30-year, fixed-rate mortgage was the standard choice for most homebuyers. Today, however, lenders offer a

wide array of loan

types in varying lengths-including 15, 20, 30 and even 40-year mortgages.

Deciding what length is best for you should be based on several factors including: your purchasing power, your anticipated

future income and

how disciplined you want to be about paying off the mortgage.

What are the benefits of a shorter loan term?

Some homeowners choose fixed-rate loans that are less than 30 years in order to save money by paying less interest over the

life of the loan.

For example, a $100,000 loan at 8 percent interest comes with a monthly payment of around $734 (excluding

taxes and homeowner's insurance).

Over 30 years, this adds up to $264,240. In other words, over the life of the loan you

would pay a whopping $164,240 just in interest.

With a 15-year loan, however, the monthly payments on the same loan would be approximately $956--for a total of $172,080.

The monthly

payments are more than $200 more than they would be for a 30-year mortgage, but over the life of the loan you

would save more than $92,000.

hat are the advantages to a 30-year loa

Despite the interest savings of a 15-year loan, they're not for everyone. For one thing, the higher monthly payment might not

allow some

homeowners to qualify for a house they could otherwise afford with the lower payments of a 30-year mortgage.

The

lower monthly payment can

also provide a greater sense of security in the event your future earning power might decrease.

Furthermore, with a little bit of financial discipline, there are a variety of methods that can help you pay off a 30-year loan

faster

with only a

moderately higher monthly payment. One such choice is the biweekly mortgage payment plan, which is now

offered

by many lenders for both new

and existing loans.

Biweekly mortgages

As the name implies, biweekly mortgage payments are made every two weeks instead of once a month--which over a year

works out to the

equivalent of making one extra monthly payment (compared to a traditional payment plan). One extra

payment a year may not sound like much,

but it can really add up over time. In fact, switching from a traditional payment plan

to a biweekly mortgage can actually shorten the term of a

30-year loan by several years and save you thousands in interest.

If you're interested in a biweekly payment plan, make sure to check with your lender. In many cases, lenders also offer direct

payment services

that automatically wi

hdraw funds from your bank account, saving you the trouble of having to write and mail

a check every two weeks.

Making extra payments yourself - do it early

nother way to pay off your loan more quickly is to simply include extra funds with your monthly payment. Most lenders will

allow you to make

extra payments towards the principal balance of your loan without penalty. This is especially attractive to

homebuyers who are concerned about

their future earning power, but still want to be aggressive about paying off their loan.

For example, if you had a 30-year loan, you might decide to send the equivalent of one or two extra payments a year (which

could shorten the

overall length of the loan by many years). But if your financial situation suddenly took a turn for the worse,

you could always fall back on the

regular monthly payment.

One important note, though, is that if you do decide to send extra funds, make sure to do it EARLY in the life of the loan. This

because most

home loans are calculated in such a way that the first few years of payments are almost entirely interest, while

the last few years are mostly

applied towards the principal balance. Thus, you can get the most bang for your buck by making

the extra payments early in the

life of the loan.

Length of Mortgage

The Anders Team
614-527-0811

Real Estate Essentials for Home Buyers!

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