Mortgage Loan Terms
A mortgage term refers to the duration of the mortgage whether the borrower keeps it for that designated duration or not. The majority of fixed-rate mortgages have a 15 to a 30-year term. However, if the market interests increase the payment of the borrower does not change. If the market interest rates decrease, the borrower could be able to secure the lower price through refinancing the mortgage.
Choosing the Right Mortgage Term
For one, the mortgage payments and the interest paid is going to be primarily determined by the terms of the mortgage. A 15-year mortgage is paid off in half the time of a 30-year mortgage meaning the monthly payment is going to be higher. Statistically, that does not mean double the 30-year term in monthly payments because there will be a lower interest done over a shorter duration of time though it is going to be higher. In all probability, the payments should be around 1.5 times that of the 30-year term for mortgages. That should stretch the usual budget in most cases so it would be advisable to take care of choosing the term to make sure, one winds up with the right loan program to fit the financial profile.
Customized Loan Term Options
Special case loan terms have been available since the inception of mortgages, especially from credit unions and small community banks. These days the more prominent mortgage lenders have gone into providing individualized mortgage loans. There are programs available which the borrower to choose a loan, which can have a term ranging eight to thirty years with a fixed rate of payment. These are available from values of $25,000 scaled to $417,000. If one is a homeowner, then it is possible to refinance even 95% of the home value, and if one is a buyer, then it is possible to purchase a house with a down payment as low as five percent of the principal amount. Shorter and alternative forms of loan terms have become more prevalent in recent years for several reasons. The first one is meager interest rates, which make the monthly payments on the shorter mortgages more affordable to the borrowers. The second is the current financial market situation which has led many within the real estate market to embrace the concept of dealing with short term debt which they can eliminate quickly and not have to deal with the repercussions on impromptu economic upheavals.