When obtaining a home loan, it is common for most borrowers to focus on getting the lowest interest rate possible. While rates do affect your monthly payment, you shouldn’t forget about the term of the mortgage.
The most common terms are 15 and 30 years, but there are other options, such as 10, 20, and 40 years. This can affect your monthly payments and the overall interest you will need to pay over the term of the loan.
Loan Term, Rates, and Monthly Payments
Shorter-term loans have lower total interests but higher monthly payments. This is because you are paying the balance in a shorter period. Longer-term mortgages, on the other hand, have higher total interests, but lower monthly payments. But you should also know that there are factors and mortgage specifics that can affect your monthly payment and overall interest costs.
In most cases, it is better to consider a home loan with a shorter term. While this comes with higher monthly payments, it will enable you to save more money in the long run. This is because you will be paying the interest faster and borrowing the money for a shorter period. Mortgage companies in South Jordan, Utah also note that shorter-term loans have lower rates because they are less risky for lenders.
Mortgage Shopping Tips
If you’re thinking of getting a loan to finance a home purchase, here are a few things that can help:
Learn more mortgage loan types. This is to choose the one that best suits you. If you qualify for multiple loan types, be sure to ask the lenders for quotes and estimates, so you can determine which one makes the most sense.
Compare quotes and estimates. Even if the first lender you talk to offers good rates, it’s still advisable to compare estimates from at least three lenders. But you should know that interest rates could change when you first consult a lender or submit an application.
Negotiate for a better rate. When you receive quotes from two different lenders, you can get them to compete with one another. If one lender gives you a good rate, you can ask the other one to match it. Note that a lender may be motivated to offer you better terms if you have a good credit score and excellent income.
You can better navigate the process if you educate yourself about the things related to home buying and mortgage application. You should also work better to become an attractive borrower and work with a reputable lender.