Home mortgage for 30 years: Is It a Right Choice?

Many people come to me for consultation on the choice of proper terms for home mortgage loans. I used to explain to them all types of options available in the markets and also I used to caution them the advantages and disadvantages of each of the options in the repayment terms for the home loans. I know that the first choice for many home buyers is loans with 30 year periods.

It is absolutely right if you think in terms of installments of repayments. You have to pay only fewer amounts as the repayments spread over a longer period. In fact this is the industry standard now. But you have to think about it little more carefully.

30 year home loan, is it a right option for you?

The main advantage for the 30 year home mortgage loans is the low monthly repayments. The other side of it is that the extra (in fact huge) amount you pay as interest. But if you assess properly, as the interest payments are 100% tax deductible, you can see that you will be paying the amount less. Also these long terms loans help you to avail more amount and hence you can afford bigger spacious homes as well.

Let us go with real calculations and compare the total interest to be paid for a long term 30 year home loan and 15 year loan. Assume that you have availed $ 100,000 at an interest rate of 7% per annum. The monthly repayment you have to make for 30 year loan is $665.30 and for 15 year loan this amount is $871.11. If you compare these two cases, you can see that you will be paying an extra amount of $56,799 for a 30 year period.

One good option is that investing the savings in the monthly repayments for a 30 year loans so that you will be getting more amount than that can be saved by a 15 year loan. In fact if you can get a better interest rate investment option, you can fetch more savings through this process. Also the decision on the 30 year loan period depends on your desire to accrue the equity.

It will take longer period to build equity in a 30 year period loan.

Typically the selection of the home mortgage loan period depends on your financial condition, repayment capability and also the loan amount you require. There is no doubt that 30 year home loan rates are the most attractive and most of the buyers opt for it. Presently 30 year loan is the longest term loan available, and many experts suggest for an increase in this period, say to 35 or 40 years.

It is your personal decision, mostly directed by your financial goals, either to go for 30 year loan or not. If you have good financial conditions, there are many other home loan period options in front of you to select. So make proper home work before deciding whether 30 year home loan is suitable for you or not.

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