Home > Mortgages > Do You Have to Get a 30-Year Mortgage?

Comments 0 Comments

You have found your dream house and can’t wait to start your new life — but you probably aren’t as excited for the monthly payment part. For many people, becoming a homeowner means taking out a mortgage. But figuring out which mortgage is best for you can be tricky. You will hear a lot of buzzwords like interest rates, monthly payments and principal. But there are other factors to compare with as well. Here’s some help to figure out how to pick the right mortgage term that fits your situation.

Your Options

This is not just a question of how much mortgage you can afford in your monthly budget, but how many years you are willing to pay before the home is yours free and clear. Most homebuyers go for a 15-year or 30-year fixed-rate mortgage term, but your payments and interest add up differently depending on which you choose. These are often the most practical when you plan to stay in your home indefinitely and prefer a locked-in rate that will remain the same for the duration of your loan.

There are adjustable-rate mortgages as well, though we won’t go in-depth into those loans here. (Here’s a good explainer on the difference between a fixed-rate and adjustable-rate mortgage.)

When you are trying to decide between a 30-year mortgage or a shorter term, it’s a good idea to calculate the overall costs for all options and think about what is more feasible for your budget. A shorter-term fixed-rate mortgage will mean you pay less overall, thanks to interest, but your monthly payments will be significantly higher.

Short-Term Benefits

By taking on a 10- or 15-year mortgage term, you will pay less interest over the life of the loan. However, borrowers with a short-term mortgage have to pay the loan off more quickly. This may seem like a negative because it means you will pay more each month, but also helps you build equity faster than other homeowners. This option is usually better for buyers of less-expensive homes and those who are refinancing without extending the term even further. It’s a good idea to think about your job situation and be sure your career and salary are somewhat stable so that what you afford now will be what you can afford throughout the full term. You should also consider how higher payments will affect progress on the rest of your financial goals — like saving for retirement or a child’s education.

When You Should Think Long Term

The other common mortgage type spans 30 years. Interest rates are sometimes higher because there is more risk for the mortgage lenders to stretch repayment over such a long period. This does give you more wiggle room when it comes to saving for other financial goals and will help you get more bang for your buck when it comes to tax benefits since you can claim the mortgage interest deduction longer. You will also have the option to prepay your mortgage if your finances suddenly improve (it’s important to check that there isn’t a fee for doing this). Thirty-year fixed rate mortgages are usually best for borrowers who plan to remain in their homes for a long period of time and enjoy the security of knowing their monthly payment will never change.

As with most credit products, your credit scores will play a big factor in whether you’re approved by a lender and what interest rate you’ll qualify for. You can check your credit scores for free on Credit.com to see where you stand.

More on Mortgages & Homebuying:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team