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A mortgage loan has three key
variables: Loan amount, the size
of the loan, or how much you
borrow; loan term, the amount of
time you have to pay off your
mortgage balance; and interest
rate, the percentage of the loan
amount paid to the lender to
borrow the money over the life
of the loan.
Your credit history will also
influence these variables.
Whether you are better off
choosing a longer or
shorter-term mortgage depends on
a number of factors, including
your monthly income and your
budget for your monthly mortgage
payment.
Shorter loan terms typically
mean higher monthly mortgage
payments, but often have lower
interest rates.
And if you pay off your mortgage
balance within a shorter term,
you may pay less in interest
overall than with a longer-term
mortgage.
A longer-term loan has lower
monthly payments, which may be a
good option if you're on a tight
budget or would prefer to direct
your monthly cash flow toward
other expenses.
But keep in mind that a longer
loan term means greater total
interest costs.
It is important to look at not
only the monthly amount you will
pay but the overall amount, as
well.