If you are looking to purchase a home, the loan term will be an important decision for you during the pre approval loan process. The loan term is the amount of time borrowers are given to pay back the total loan. The most common mortgage loan terms are 15 year and 30 year mortgages. So what's the difference? Most people attracted to the 15 year term mortgage are drawn to the lower interest rates (compared to 30 yr mortgage interest rate) and paying the home off in half the time. With 15 year mortgages you will pay a higher total monthly note (compared to a 30 yr mortgage) because a larger amount of your payment goes towards paying the principal down. For those people who opt for the 30 year mortgage term, although they are getting a higher interest rate, they are able to afford more house for a lower total monthly note (as compared to 15 yr mortgage). Experiencing the monthly savings, for some, may be more important to them than paying the loan off in half the time.
Regardless of which you choose, make sure you understand the cost of the loan for both terms. Understanding the total cost of the loan and the monthly obligation will help borrowers to make the right choice for themselves.
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