How To Decide Whether You Should Get a 30 Year Mortgage in Utah
Getting a 30 year home loan used to be a popular choice among home owners in the state of Utah. The reason behind this had to do with the total home loan payment being spread out across a longer time period, thereby enabling buyers to pay less each month. Plus with interest rates fixed for the full 30 year period, it has always seemed like a good deal. But is it really?
The one major benefit of a 30 year home mortgage loan is that one pays lower monthly payments. At the same time, you should take into consideration the fact that you actually pay more in interest than a person with a 10 year loan. So the longer the loan period, the more one actually has to pay.
To visualize the major difference the period of the home mortgage loan makes, let us look at an example. Let’s say there is a 30 year home loan on offer whose interest rate amounts to seven percent. The home loan amounts to $100,000. That means your monthly payment amounts to around $665. It also means the total in interest paid for the 30 year period will amount to around $140,000. Now, suppose you are also offered a 15 year home loan with the same amount of interest as well as the same total loan amount. The monthly payment will be around $870 and the total interest over a 15 year period will amount to $56,800.
By going for the 15 year loan, you actually save over $83,000!
A longer home loan period does offer more flexibility to a certain extent. Let’s say your financial situation suddenly takes a turn for the worst. If you happen to lose your job and are unemployed for a period of several months, having a lower monthly home loan payment to make will alleviate a lot of your financial stress.
So which choice is the better one? The longer or shorter term loan? I think that if you happen to have financial knowledge and your situation is relatively stable, it would be a good idea to go for the 30 year loan while investing the savings you would otherwise have to put towards monthly payments. The long term payoff may even exceed the money you put towards paying back your home mortgage loan.
Then again, if you do not have financial stability or knowledge, go for a shorter term loan. You do wind up paying a lot more each month, but in the long run you pay a lot less for the loan. Also you will acquire equity in your home a lot quicker.
While a 30 year or 40 year home loan sounds attractive, there are many questions that should be answered before taking one out. Hopefully, this article will help to educate Utah buyers of some of the points that need to be considered before choosing the home loan mortgage period.