If you’re buying a home for the first time, is taking out a 30-year mortgage a good idea? When you consult with a mortgage company in Naples and other places, you will be offered repayment options that can be as short as ten years or as long as 30 to 35 years. If you live in a place like Naples, where the real estate market is continuously thriving, it can be a bit confusing to decide which type of mortgage will work best for you. Do you go for the shorter repayment terms to save money? Or do you choose the 30-year plan so that you can make lower payments each month?
Many Americans choose a 30-year mortgage in order to afford the repayments each month. In fact, the >majority of home loans> today are on a 30-year mortgage plan. However, this type of home loan has drawbacks that may have you opting for a shorter repayment term.
Let’s talk about the pros of a 30-year mortgage first:
Advantages of a 30-year mortgage
- Low monthly payments. Most Americans select this type of home loan for the sole reason of having to pay less each month. A mortgage is a big responsibility, and as a result, many people want to take out a loan that they can confidently handle.
- Payment flexibility. If a homeowner’s income increases a few years after they take out a mortgage, they can choose to pay more so that they can finish off the loan earlier.
- More money for other things. Buying a home is not the only thing on people’s priority list. Besides a mortgage, homeowners have to pay utilities, groceries, education, existing debts, and other things. Having lower monthly payments is thus ideal for families who need extra money for other expenses.
A 30-year mortgage is still the golden standard for home loans today. It is an affordable option for families in the low to the middle-income range, even those with low credit scores. But before you sign up for this type of mortgage, consider the cons as well:
Disadvantages of a 30-year mortgage
- More expensive. Even though you are paying less in monthly repayments, a 30-year mortgage has higher interest rates, which means that you are actually paying more in total.
- Longer repayment. A 30-year mortgage will take almost half a lifetime to pay off. And during these three decades, you will be saddled with a debt that you can limit your finances each month, possibly causing you to put off other expenses that are just as important.
- Not ideal for people on the move. >When you take out a 30-year mortgage, you should be absolutely sure that you’re staying in the home for good, unless you want to lose money when selling the house prematurely.
Taking out a mortgage will put a major responsibility on your shoulders, which is why you should think twice or even thrice before choosing a mortgage plan. All things considered, a 30-year mortgage is not ideal for people who want to save money in the long run. But if it’s the only way you can afford a home, consider getting a cheaper house that you can pay off faster.