When you're looking for a mortgage, you need to decide which
loan term you want and choose the type of interest rate.
The loan term is the length of time you have to pay back the
loan. The longer the term, the lower the monthly mortgage payment.
The shorter the term, the higher the monthly mortgage payment.
Most home mortgage lenders offer two basic terms: 15 and 30
years, and many also offer 20-year fixed rate mortgages:
- 15-Year Term
This term has higher monthly payments because the loan is
shorter. The interest rate is usually lower and you can build
equity faster.
- 20-Year Term
This fixed-rate mortgage builds equity more quickly than with
a traditional 30-year mortgage as well as saves you interest
over the life of your loan.
- 30-Year Term
Interest rates may be somewhat higher for this term and you
pay more interest over time.
