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Sunday, August 17, 2014
Repayment Term Of A Home Loan
As part of the financial review process, you will be given a number of choices. Some loans are available with fixed rates, other are adjustable. Some lenders offer conversion privileges within a limited number of years. For example, you may begin with a fixed rate that reverts to adjustable after 3 years; however, you can convert to a long-term fixed-rate mortgage within 3-years term. There are endless varieties of this theme.
In making comparisons between loans, conversion privileges and similar points should be considered. They may not have a tangible value but could be worth a lot in the future. Their intangible value makes comparison difficult, but each loan's privileges should still be in your mind when you are matching up one lender's range of loan terms alongside those of another.
One point to think about carefully: do you want to repay your loan over a very long term, or over a very short term? The 30-year mortgage means paying for your house at a much higher level, because of interest expenses and the rate of amortization, but it also means lower monthly payments. A 15-year mortgage means your house will cost less, but your monthly payments will be much higher.
Remember, if your lender applies a ratio between your income and your monthly payments, you might not quality for a shorter-term loan. You might have to go for the longer term, even if you would prefer a shorter one. The payments on the 15-year mortgage will be higher than any longer-term loan at the same rate of interest; the lender might not be able to approve your application except with the 30-year loan.
This dilemma has one possible solution: you can still repay the contracted 30-uear repayment term but having the flexibility to repay the loan sooner, you take control of your financial future. That strategy could be the best way to go. Your contract calls for 30-year payments, but you actually pay at a much higher rate, saving a lot in interest. However, if you lose your job or experience some other temporarily financial emergency, you can revert to the lower payment schedule until you're back on your feet. If, on the other hand, you start out by agreeing to higher monthly payments, you cannot adjust the payment level to suit your own convenience.
The repayment term of a mortgage loan can be handled better with the assistance of a home mortgage broker.
In making comparisons between loans, conversion privileges and similar points should be considered. They may not have a tangible value but could be worth a lot in the future. Their intangible value makes comparison difficult, but each loan's privileges should still be in your mind when you are matching up one lender's range of loan terms alongside those of another.
One point to think about carefully: do you want to repay your loan over a very long term, or over a very short term? The 30-year mortgage means paying for your house at a much higher level, because of interest expenses and the rate of amortization, but it also means lower monthly payments. A 15-year mortgage means your house will cost less, but your monthly payments will be much higher.
Remember, if your lender applies a ratio between your income and your monthly payments, you might not quality for a shorter-term loan. You might have to go for the longer term, even if you would prefer a shorter one. The payments on the 15-year mortgage will be higher than any longer-term loan at the same rate of interest; the lender might not be able to approve your application except with the 30-year loan.
This dilemma has one possible solution: you can still repay the contracted 30-uear repayment term but having the flexibility to repay the loan sooner, you take control of your financial future. That strategy could be the best way to go. Your contract calls for 30-year payments, but you actually pay at a much higher rate, saving a lot in interest. However, if you lose your job or experience some other temporarily financial emergency, you can revert to the lower payment schedule until you're back on your feet. If, on the other hand, you start out by agreeing to higher monthly payments, you cannot adjust the payment level to suit your own convenience.
The repayment term of a mortgage loan can be handled better with the assistance of a home mortgage broker.
