An FRM (fixed rate mortgage) may have a term as short as ten or as long as forty years. The longer the maturity, the lower the mortgage payments will be, but the other side is that the borrower will be paying for a long time. For anyone interested in lowering both their total payments and the amount of time they will be paying off their loan, a shorter term FRM is best.
Even though longer term FRMs cost less every month, they are more expensive overall because you pay them for that much longer. A FRM of just ten years can carry monthly payments that are up to twice as high as those of a 40 year mortgage.
Another concern is that, since the lender has a longer period of risk, it will charge a higher rate for the longer term mortgage.
Because of these various blends, the 15 to 30 year FRMs are usually the ones that offer the best mix of lower monthly payments with lower overall costs and lower interest rates. Of course, the long term FRMs will have low monthly payments with higher rates.
Most borrowers, therefore, find that the fifteen year term fixed rate mortgage carries the best combination of affordability and low interest rate.
The payments that will be required on your mortgage can be easily calculated by a mortgage consultant. If you can’t manage this mortgage payment, you can then move into a longer maturity until you meet the amount you have budgeted for your mortgage.
If you do take a longer term FRM for its present affordability, you can always pay more down to reduce the principal. Many borrowers have no choice but to take the home loan they can afford today, and then pay down more when they can afford more. If you make additional payments on the loan, you are effectively lowering the maturity.
If you consult with a broker, he can tell you exactly how much you will have to spend on your home loan each month. These payment charts are easy to find and use, but a mortgage consultant may make the process easier for you, an there is no obligation on your side.
In any case, the goal is to find the FRM that will yield you the monthly loan payment you can afford while keeping the maturity of the maturity as low as possible.
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