Top best answers to the question «Your home loan term: is 20 or 30 years better»
Simply put: A 30 year home loan term means lower monthly repayments, but higher interest rates. A 20 year home loan term means higher monthly repayments, but lower interest rates.
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A 30 year home loan term means lower monthly repayments, but higher interest rates. A 20 year home loan term means higher monthly repayments, but lower interest rates. Lenders consider a 30 year home loan a higher risk, hence the higher interest rate.
Martle explains that a 30-year loan can make a loan immediately more affordable, with the monthly instalment on a 30 year loan being less than the monthly instalment on a 20 year loan granted at the same interest rate - at least in the current low interest rate environment.
The interest rate never changes during the entire loan term. But the 20-year mortgage term is a full decade shorter. This results in less interest paid in exchange for a higher monthly payment. The 20-year fixed mortgage is a pretty simple loan program, just like it’s much more popular cousin the 30-year fixed.
When it comes to selecting a loan term, most lenders will offer you either 25 or 30 years to repay your home loan in full. But this is often flexible – some borrowers will repay the loan sooner, while those who default or defer payments due to financial struggles may end up repaying the loan over a longer period than they initially anticipated.
Similarly, you may not want to pick a 20-year term or 25-year term over a 30-year loan if the rate isn’t significantly better (or at all different) and affordability is a concern. You can always pay extra on your mortgage later to save money on interest and whittle down the loan term. How to Change Your Mortgage Term
With a 15-year mortgage, your monthly payments are higher but you’ll pay less in interest overall. With a 30-year mortgage, the opposite is usually true. You’ll end up paying more for your house due to the interest. But your mortgage payments will typically be smaller.