All Financial Wisdom

Mortgage Length

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Mortgage length along with all of the other mortgage options like “fixed,” “variable,” “option,” “points,” and “term.”  To narrow down what mortgage terms would work for you, let’s discuss mortgage length.

Home Mortgage

When you are looking at a mortgage for your home, you are probably thinking long term.  Term lengths are usually either 15 and 30 years.  With a 30 year mortgage, you will pay more interest during the life of the loan, but each payment will be smaller.  Having to pay less each month allows more money in the budget to use for other things.  This is nice for when you change changes, add a member to your family, or go through tough times.

When looking with a 15 year mortgage, you will pay more per month but after 15 years, it is yours.  This is useful for people planning on retiring near that 15 year time frame and want to have their house paid-off.  This can also be preferred by young professionals starting a family.  In 15 years, college would be one of their next goals for their children.  Therefore, they have zero house payments when paying for college.

Income Property

When shopping around for an investment property mortgage, you are probably thinking about cash flow.  The flow of cash each month that your property is estimated to make is quite important and your mortgage is definitely the largest expense for this.  I like to think that there’s two strategies to this:

  1. Think short term cash flow.  Almost immediately, you will want your property to create a decent amount of money for you.  In this case, I would choose the 30 year mortgage.  This way, the payments each month will be smaller and you will end up making an income from it right away.
  2. Think long term value.  If cash flow isn’t all that important to you right off the bat, you may want to look at a 15 year mortgage.  By going this route, you would be paying more per month, but you after paying off the mortgage in 15 years, your property would be cash flowing very nicely.

Conclusion

When shopping around for a mortgage, make sure you do more and more research into your own expenses and financial situation.  15 years is a decent amount of time and can make a big difference in your financial future.

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