What is Meant by Mortgage Payment Terms?
When you take out a loan to purchase a home, one of the major decisions you will face is how long you wish to take to pay it off. The length of time the loan is financed over is referred to as the mortgage payment term. Because of the significant amount of money typically involved in a home loan the loan payment terms are usually quite long. The 15 or 30 year fixed payment terms are very common.
What are the Different Types of Mortgages?
The two primary types of mortgages are the fixed rate mortgage and the variable rate mortgage. Each has its advantages and deciding which is the best suited to your needs will depend largely upon current economic factors and your own financial situation and stage of life. Fixed rate mortgages lock you in at a specific rate which remains constant throughout the term of the mortgage. A variable rate mortgage fluctuates as interest rates rise and fall.
Is a 15 or 30 Year Fixed Payment Term Better?
There is no cut and dried answer to the superiority of a 15 year fixed mortgage over a 30 year fixed mortgage. It is however safe to say that it is preferably to get as much equity paid into your home as quickly as is possible. With a shorter term you will be putting much more of your money into paying down the principal of the loan, thereby building equity. However, it is never advisable to strive for payments that strain you financially. A better option is to take a slightly longer payment term and make whatever additional payments you can. Just be sure to be aware that many fixed rate payment loans have some limits to the amount that can be paid in advance. Within the limits it is possible to make extra payments that can have a considerable effect on your home equity.