If you are in the process of refinancing your mortgage loan, your mortgage term length can either cost or save you a lot of money. Term length is the amount of time you have to repay the mortgage and the term length you choose depends on your financial needs for the loan. Here are several tips to help choose the right term length for your financial situation when mortgage refinancing.
The most popular mortgage term lengths available are 15 or 30 year loans. When choosing a term length you need to consider how long you plan on keeping your home, what you need your mortgage payment to be, and what your financial objectives for the loan are.
Mortgage Refinancing With Longer Term Lengths
Traditional mortgage loans have 30 year term lengths; this is the mortgage your parents had and is excellent for homeowners with a low tolerance for financial risk. Generally speaking, the longer term length you choose, the lower your monthly payment will be. Mortgages with long term lengths may free up money in your budget for the short-term; however, you will pay more for the financing over the life of the mortgage loan. Mortgages with longer term lengths are easier to qualify for, and there are now forty and fifty year term lengths for homeowners that need the lowest mortgage payment possible.
Mortgage Refinancing With a Shorter Term
If you are willing to forego a smaller mortgage payment and want to build equity in your home at a faster rate, choosing a 15 year term length will help you meet your goal. The advantage of a short term mortgage is that you will pay significantly less to your lender in finance charges.
Whatever term length you choose it is important to comparison shop to avoid overpaying for your loan. Watch out for Yield Spread Premium, this unnecessary markup of your mortgage interest rate by your Mortgage Company or Broker will cost you thousands of dollars. You can learn more about your mortgage refinancing options, including costly mistakes to avoid with a free six-part video tutorial.
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