Know Whether A 30 Year Mortgage Is A Smart Financial Choice
A home loan that can be paid off completely in 30 years along with interests and closing costs is known as a 30-year mortgage.
Most 30-year mortgages have a fixed rate, which means the interest rate stays the same for the entire duration of the loan. If you are planning to apply for a 30-year mortgage, here are a few advantages and disadvantages for you to know whether such mortgages are a smart choice.
Advantages of a 30-year mortgage
- Flexibility: A 30-year mortgage gives homeowners the most flexibility. With lower payments than in a 15-year mortgage, you can pay an extra monthly payment to cut some years down from the mortgage period.
If you expect bonuses or commissions regularly from your job, then it is feasible for you to apply for a 30-year mortgage. The lower payment is easy on your income and also gives you the option of paying more when you wish to. Lower monthly payments: Against a shorter loan term, a 30-year mortgage term stands out because of its lower monthly payments. This is a great way to have more money in savings and for other expenses every month. Opportunity to finance other goals: Another advantage of lower payments is it gives you the opportunity to put money into other financial goals.
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Disadvantages of a 30-year mortgage
- You spend more money over time: With a 30-year mortgage loan, you pay more in the form of interest because of the long duration of the loan. However, this doesn’t make a shorter loan period better. If you keep your monthly payments low and invest your savings in your future, then your finances are sorted.
- Higher interest rates: Lenders charge you higher interests for long-term payments since a longer mortgage period increases their risk in lending money.
- You will be under debt for quite a long time: A 30-year mortgage increases your risk of carrying debt into your retirement, but if you save and invest in your loan whenever you can, you save yourself from debt later.
- Slower equity building: With a 30-year timeline, it takes a little longer for you to build equity in your home.
- Don’t surrender to greed: Getting your dream home is nice but be realistic. There’s no reason you should buy a home that’s difficult to afford. Moreover, if you purchase an expensive house, the property taxes will also be higher.
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