Before buying a home, it’s best to understand which types of home loans are available or which you qualify for. There are many types of loans in the market today. Every home loan may not be the right choice for every individual. So before deciding, look into each home loan and understand the benefits and risks associated with it. 30 year home loan, is the most popular choice among homeowners. But the question is, is it the right choice for you?
As with any other loan, this one has advantages and disadvantages associated with it.The most appealing fact about this loan is that the payments are spread over time which does give the homeowner lower monthly payments. The interest rate is set for those years. This makes it the top choice among homeowners. However, you will be paying thousands of dollars in interest over the years. But the interest is 100% tax deductible which means that your tax cost will be lower.
In life, situations can change in a very little amount of time. People can lose their jobs in a heart beat or any other unforeseen circumstance. As any homeowner in that situation, one would want to have lower monthly payments. Another advantage of this type of loan is if you have extra money, you can certainly pay it off in less than 30 years while still have lower monthly payments. A lot of people are able to afford bigger and better houses with this type of loan.
Lets see the difference between a 30 year home loan and a 15 year home loan. For example, Your monthly payment of interest and principle on a 30 year , $100,000 home loan with a 7% interest rate will be $665.30. You will have paid $139,511.04 just in interest alone over the years. Now the same number with the 15 year home loan , you will have paid $871.11 in monthly payments and $ 56,799 in interest. You would have saved substantial amount of money on the interest, if you had chosen a 15 year home loan.
One of the most important question you need to ask yourself is that what are your financial goals?Which loan will help you reach towards your goal? How fast would you be able to build equity in your home or own it?It takes a lot longer to build equity in a 30 year home loan than a 15 year home loan. There may be other plans, which may sound more appealing according to your situation. Evaluate your financial situation and than make a decision.