Shorter Vs. Longer Mortgage Terms: What’s The Difference?
You may think the contrast between these loans is obvious: One mortgage is short and the other is long. But the loan length is just one of several differences between short-term and long-term mortgages. When deciding on a mortgage term length, use the following sections as a guide:
Shorter Mortgage Term
Do you know where you’ll be in 15 years? How about in 30 years?
For most of us, the answer is probably no, and this is one of the biggest advantages of short-term mortgages. As opposed to long-term mortgages, which are typically spread over 15 to 30 years, short-term mortgages allow homeowners to pay off their loan in 10 years or less while paying significantly less in total interest along the way.
These lower interest payments, along with a shorter loan length, can easily lead to more financial freedom. However, short-term mortgages do come with the drawback of higher monthly payments to offset this.
Longer Mortgage Term
There’s a reason the 30-year mortgage is the most common in the U.S. Whether due to the larger loan amounts offered or the convenience of paying low monthly payments over a longer period, these loans come with obvious advantages.
Homeowners with long-term mortgages also have refinance options to pay it off early if they find themselves financially able to do so (but be aware that some lenders charge prepayment penalties).
With that said, these advantages also mean paying more in total interest over the life of the loan.
Whether you want to go the traditional route with a longer mortgage term or take advantage of paying less in interest with a shorter term, make sure the loan will fit your budget. It’s best to explore all of your options and see what types of terms you qualify for.
