Should my mortgage be short or long term?

Blog advizing not to get a very long term mortgage.

Tuesday, October 17, 2006

Should my mortgage be short or long term?
Most of the standard terms are considered to be 25 years. However I may choose a different term if it suits you and the lender agrees that I can afford it. I have to keep in mind that with a shorter term, I will have higher monthly payments but pay less in total. While with a longer term, even with a low morgage I will pay less each month but more in total, is pretty simple. Of course, estimation with a mortgage calculator show me a lot of options.
Besides all beware of making financial commitments that continue past your retirement age I’m sure I will be able to afford the payments. It should be looked twice, or even more, before taking out a 40-year loan to buy a house. With the skyrocketing price of properties many middle class family are attracted by this kind of mortgage deals. But the extra 10 or 20 years won't reduce the monthly payments all that much. And it will be paid so much interest to the bank. Eventually the equity will grow so slowly, that the home will never be a good investment, helping to save and build wealth.
There are many personal and emotional reasons instigating one’s family to buy or build a house. But financial considerations also play a big part in the decision, too. A home should become the foundation for building wealth. As you are progressively paying back your mortgage, your home should quickly become one of the most valuable things you own. Besides the equity you create by paying off the loan is a type of savings that you can use to send your kids to college or ensure a comfortable retirement. And with morgage rates dropping the market rises the value and the equity of your home automatically. But with a 40- and 50-year loans it can't build wealth because it has to be given really too much of what should be your money to the bank.