If you plan to live in your home for at least 10 years and want your mortgage payments to stay the same, you should think about getting a fixed-rate mortgage. Fixed-rate mortgages can be taken out for 10, 15, or 30 years, and they give you the peace of mind that your monthly payments will never go up. This is a good idea when interest rates are low because you can lock in the current rate for the life of your loan, whether it's 10, 15, or 30 years. This protects you from interest rates going up in the future.
There are a few things to think about when choosing between the different types of fixed-rate mortgages. The monthly payments for a 30 year fixed rate mortgage are less than those for a 10 or 15 year mortgage. On the other hand, the interest rates are higher. And since you can't change your interest rates as long as you have the loan, there may be times when rates go down but you have to keep paying higher rates.
Even with a 10- or 15-year mortgage, you could end up paying more than the current interest rate, but this is less likely to happen because the terms are shorter. And mortgages with fixed rates for less than 30 years have lower interest rates than mortgages with fixed rates for 30 years. Also, because you are paying off more of the principal with each monthly payment, you will build equity in your home faster. To do this, however, your monthly payment is higher than payments on mortgages with longer terms.
Find out about mortgages for 50 years.
In some parts of the country, home prices are at all-time highs, making it hard for many people to realise their dream of owning a home. When you add the possibility of interest rates going up, that dream can turn into a nightmare for some. Because of this, some mortgage lenders in the U.S. have started offering 40-year and 50-year loans to meet the needs of more people who want to buy a home.
With these newer mortgage options, more people can buy homes because the loan is spread out over a longer period of time and the monthly payments are lower. It's easy to see why the payments are lower each month: Imagine making 360 monthly payments on a $400,000 home over the course of 30 years or 600 monthly payments over the course of 50 years. The payments on a 50-year mortgage would be much lower.
Even though you'll pay more in total interest over the life of a longer-term loan than you would on a 15- or 30-year mortgage, you'll still be able to build up home equity because you'll be paying both the principal and the interest. This makes 40-year and 50-year mortgages good alternatives to old standbys like interest-only and payment-option adjustable-rate mortgages, which can be more expensive in the long run because little or no principal is paid off.
