Do you plan to take on a mortgage to buy a home? While many buyers focus on whether or not they can qualify for a loan, today's borrowers have many more options to consider than borrowers in the past. One option that can turn a standard mortgage into a customized loan perfectly sized for each family is to vary the loan term. Why should you consider varying the loan term? And how can you do this? Here's what you need to know.
Why Vary the Loan Length?
Standard mortgages come in a few common lengths, and you'll likely first be offered a standard 30-year mortgage as a matter of custom. But this term length was designed by prior generations with different financial situations. It's currently used to keep mortgage payments as low as possible, but it extends the borrowing time for most homeowners.
Instead of just taking this choice, consider your own personal financial and life situation. Do you plan to keep the house for 30 years? Can you afford a higher payment? Do you want to use the money for other things? Is this a later-life home purchase? How does a mortgage fit into your financial plan? Do you want to turn the property into a rental later? Today's possibilities are endless.
All these choices and decisions mean that a standard number of years may not be in your best interests. If you can or want to pay off the house earlier, a 30-year or even a 20-year mortgage could keep you in debt longer than you need to be. The answer is to have more control over your loan length.
How Can You Vary the Term?
There are basically two methods to choose the right custom mortgage term length. The first is to base your choice on a date. This could be your retirement date, when your kids will head off to college, or just a set number of years when you want to be debt-free.
The second method is to determine your perfectly-sized monthly payment. Then you can work backwards with your lender to determine the right amount of years to fit your financial goals. Most loan programs can now be customized to fit even the most specific numbers of years.
Where Should You Start?
Want to get started customizing your mortgage to fit your lifestyle exactly? Begin by meeting with a mortgage lender in your area today. Together, you can build a customized plan that makes your mortgage manageable but fits your future financial goals.Share