March 21, 2018 1 min to read
Taking a 30-Year Mortgage: What are the Drawbacks?
Category : Business
For the average American, the home is the greatest investment in their portfolio. In most cases, large mortgage loans back these houses due to the hefty asking prices.
To keep the monthly repayments affordable in the face so rising costs, people opt to spread their loans over a 30-year period. But mortgage lenders in Clarksville do not always agree, depending on the situation of the borrower.
While such an approach works, it comes with some setbacks that are hard on your finances.
You end up paying more
If you are a first-time buyer standing on a shaky financial ground, you are likely to pick a less expensive home. For instance, you could settle for a home worth $182,000 with 5 percent down. If you were to opt for a 30-year plan, the monthly would work out to $838 with an interest rate of 4.10 percent.
On the other hand, if you were to commit to the shorter 15-year plan, the monthly payment would rise to $1,233, but the interest rate would come down to 3.43 percent. If you were to raise the deposit to 20 percent, you would save $191 on the 15-year plan and $130 on the 30-year plan, monthly.
You could end up with a small nest egg
If you buy your house late in your career, chances are that you could retire long before clearing the mortgage. The loan repayments might make it difficult to set aside an emergency fund or even save for retirement. Hence, you need to weigh various options when selecting a loan plan for your mortgage.
Instead of opting for a high-priced house on a large loan spread over a long time, you might want to settle for a less costly one. On the other hand, if you opt for a 30-year plan, it is better to get a fixed mortgage rate instead of one with an adjustable rate.
While mortgage loans make it possible for people with average incomes to own homes, you need to approach the process with a bit of care. The length of your loan bears a considerable influence on your finances in your life.