Most borrowers take 30 year home loan their first choice. It can be reasonable since the total payments are spread over a longer period of time with the interest rate set for the entire time of the mortgage. Though 30 year home loan rates are an industry standard but you have to make an evaluation before making the choice?
The plus side for a 30 year home loan is lower monthly payments. This attraction is somewhat dimmed by the fact that you pay thousands extra in interest. But, your interest is 100% tax deductible which does lower your after tax cost. It offers you some flexibility so that if your financial situation changes and you have more money you can pay it off in less than 30 years, this while keeping the low monthly payments. Your payments are smaller so in reality you can purchase a larger roomier home.
To show an example of the interest difference between 30 year home loan rates and one of the other rates. On a 30 year basis and using 7% interest rate, for every 1,000 dollar loan your monthly payment of interest and principle would be $6.653 dollars. Over the next 30 years you will have paid $1,395.11 in interest alone. Now with a 15 year home loan rate on the same amount you will pay $8.7111 per month and over the next 15 years, you would pay $567.99 in interest. This would save you $827.12 dollars.
If you have the will power to invest the savings from the monthly payments, it still could be a good choice to go with the 30 year mortgage. Especially if you can find an investment that the long term payoff matches or exceeds what you would save in a 15 year mortgage. Another factor to consider is how fast you want to accrue equity in your home or to own it out right. 30 year home loan rates take much longer to build equity.
30 year home loan rates are certainly attractive and the vast majority of home buyers get 30-year loans because that is the longest home loan available today. Experts agree if they could get a 35- or 40-year loan, they probably would. There are many other options to consider. Probably the biggest question you have to ask yourself when considering a loan is what are your financial goals? What loan plan will help you the most to reach that goal? It is clearly to your advantage to look into other loan options for the best loan available for you and your financial goals. It may surprise you that because of your personal situation there may be other plans more suitable for you. So it is very important to clarify your financial goals before making your choice of your home loan plan.
