Check Term in Mortgage
December 3, 2008
Many people automatically obtain mortgage financing that amortizes over thirty years. Amortize, according to Wikipedia, “is the process of decreasing, or accounting for, an amount over a period of time. The word comes from Middle English amortisen to kill.” Basically, applying it to a mortgage, it means the terms for killing off that huge debt to which you just obligated yourself. That’s a nice thought – killing your mortgage, right? Now, consider the basic question - how long are you going to be hacking away at this debt?
Typically, as aforementioned, the most common loan term is for 30 years. But also quite common is the 15 year mortgage. What’s the most obvious difference? In basic terms, it’s the payment itself. The loan that amortizes over 15 years costs you approximately 20% to 25% more out of pocket per month. That difference oftentimes is where the buck stops. It’s a matter of affordability.
However, if the numbers work for you, a 15 year mortgage has its added attractions. In a nutshell, you pay less interest over the period of the loan, so it’s less out of pocket at the end of the day (or mortgage, in this case). Over fifteen years, this time reduction can result in considerable savings. Read more