So the best mortgage term is one that results in affordable monthly repayments, but does not have you paying more in interest than necessary. Use a mortgage calculator to try different term lengths and find out how much it will cost:.
Choosing a 25 year term will be cheaper in the long run, but make sure you can afford the higher monthly payments. If a shorter term makes repayments too expensive, consider the longer 30 year term. If interest rates go up later, your repayments will increase more if you have a shorter term, so make sure you consider rate rises when you budget for your mortgage.
Decide how long you want to repay your mortgage as well. For example, if you retire in 25 years and want to be mortgage free by then, you could choose a 25 year term if you can afford it. When lenders decide if they will accept your application, they look at your finances and make sure you are able to afford the repayments. If you choose a short term that comes with repayments you cannot afford, it is likely your application will be rejected. Some lenders will only offer mortgages that will be paid off before you retire and sometimes they have to be paid off before you reach a maximum age.
This means that older borrowers can only get short term mortgages with these lenders. Here is how to find a mortgage when you are older. Some mortgages let you make overpayments.
This means paying more than the amount due each month or paying off a lump sum. Making overpayments has the same effect as shortening the mortgage's term: the balance will be paid off quicker and you pay less interest. However, it gives you more flexibility because you can choose when you overpay, but having a shorter term means you have to pay a higher amount every month.
Check if your lender allows overpayments, if you can make them without paying a fee and if there is a limit to how much you can pay. How to decide if you should overpay on your mortgage. You can get mortgages that come with an initial interest rate for up to ten years. This rate can:. If you get a fixed rate that lasts for several years, your interest rate and the amount you pay each month will stay the same, even if most other rates rise.
Here is how to decide on the type of interest rate you want and how long it should last. If you're a first time buyer or looking to move house or remortgage, we can help you find the best mortgage deal to suit your needs.
Use this mortgage calculator to work out how long it will take you to pay off your home loan and be mortgage free, based on your repayments and interest rates. Eligibility and terms and conditions apply. Purchasing a home is a substantial commitment and our mortgage time calculator can give you an estimate of how long it will take you to be mortgage-free. This calculator requires you to input your home loan amount and your repayment frequency - monthly, fortnightly or weekly - to calculate the estimated length of your loan.
Keep in mind that the more frequent your repayments, the more interest you are likely to save over the life of your loan. Check out our fortnightly repayments calculator or get in contact with a Mortgage Choice broker to find out how repayment frequency can impact the length of your loan.
Our mortgage brokers will sit down with you to discuss the right loan period for your circumstances and help to evaluate hundreds of loans from a wide choice of lenders to find the option that suits your needs. Extending your mortgage term over 30 years gives you a little more wiggle room when it comes to saving. This can put more money back in your pocket each year. Since you may not be able to take advantage of other tax deductions, the mortgage deduction could help.
The other advantage to going with a year mortgage term is that you have the option of prepaying your mortgage. Even something as simple as making payments on a biweekly schedule rather than monthly can shave years off your mortgage. Keep in mind that it takes discipline to pay down your mortgage early. But this also means you might pay a price in terms of sacrificing your other financial goals. Find out Ways of repaying an interest-only mortgage.
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