Picking Your Mortgage Term

Time is very valuable asset and when choosing a mortgage selecting an acceptable mortgage term could save you thousands.

Typically, lenders offer terms from anywhere from 6 Months all the way to 25 Years.
Essentially, the mortgage term serves as the time that you are locked into the mortgage agreement. The most important part of the agreement of the term is the mortgage rate. This is why you should choose the best possible term to meet your needs, as you may pay a major penalty for breaking it.

The following things should be considered:

1. Economic Conditions

Lenders set lower rates for smaller terms if they believe that at the end of your term mortgage rates will be higher. Avoid the short-term low rate, and opt for the longer term of five years if this is the situation. Alternatively, if interest rates are believed to decrease, consider a shorter term.

2. Think about how long your mortgage is required for.

Consider how long you will need your current mortgage for, are you planning on selling in two years? Plan on having only a two year term. It is also a good idea to think about when you will need to refinance, as you will avoid a heavy penalty by locking into a term that coincides with this.

Most clients lock in for terms of about five years. There are terms that are longer, but the luxury of having them is not likely to yield more savings than depending on the ebb and flow of the market.