How to choose a mortgage loan term

Whether you buy a house or refinance your current home, you can assume that your financing choices with a fixed-income home loan are limited to a term of 30 or 15 years. While these are the most popular loan choices according to the Mortgage Bankers Association (MBA), many lenders offer mortgage loans for almost every loan period you choose.

The MBA says that 15% of all refinancing mortgages were homeowners for non-traditional conditions in June 2012, while only 2% of home purFinder Mortgages were for non-traditional loan conditions. In fact, 85% of purchase loans consisted of 30-year fixed-rate loans.

If you are considering refinancing, a non-traditional mortgage condition of 20, 10 or even an eccentric period of 17 or 23 years can be attractive because you can extend the payment of your loan to a certain date, such as your pension or what would be the payment date of your original 30-year loan.

Loan term options

Loan term options

Adjusted loan conditions are available as long as mortgage loans exist, in particular from small community banks and credit unions. Nowadays some larger mortgage lenders have jumped into offering individualized mortgage loans. Quicken Loans, for example, advertises heavily with its “YOURgage” program, which allows borrowers to choose a loan period of 8 to 30 years with a fixed interest rate. These loans are available for $ 25,000 to $ 417,000. If you are a homeowner, you can refinance up to 95% of your home value and if you are a buyer, you can buy a home with a down payment of only 5%.

Although adjusted terms of, for example, 7 or 17 years are not always available at the larger financial institutions, some lenders such as Finder Mortgage offer fixed-rate loans for 10, 15, 20, 25, 30 and 40-year terms .

Shorter loan terms and alternative loan terms have become more popular in recent years for two reasons: First, extremely low interest rates make monthly payments to shorter mortgages more affordable for borrowers. Secondly, the recession and the scary levels of unemployment have led many consumers to embrace the concept of eliminating all debts, including mortgages.

Why choose an alternative loan period?

Why choose an alternative loan period?

There are several reasons why you might want to choose an alternative loan period:

  • Less interest . Shorter loan terms tend to be more popular when refinancing homeowners rather than buyers. This is because these homeowners have been paying off their loan balance for several years and want to stay on track to pay off their home within the original timeframe of their first loan – usually 30 years. If you have a 30-year mortgage and have been paying for 11 years, you may not want to use a 30-year loan again because you will pay interest and pay the mortgage for much longer. You can save thousands of dollars in interest payments with a shorter loan period and use that money for other investments.
  • Handy payout date . In addition to adhering to your mortgage planning, you may want to consider a different loan period so that your payment date matches your retirement date or when your child starts studying. Some refinancing homeowners want their new loan to end when their original loan expires and therefore switch to a 20-year mortgage if they have had their current loan for 10 years.
  • Budget restrictions . Both buyers and homeowners can choose a customized loan term to find the best fit between their home budget and their mortgage term. For example, if the payments are too high with a 15-year loan, they may be payable on a 20-year loan, even if the interest is slightly higher.

How to choose a loan period

How to choose a loan period

Whether you are a buyer or a refinancing homeowner, your loan period must be taken in the context of a financial plan. Determine how much you can afford to spend on your monthly mortgage payment before you start discussing loan options with a lender. Even if a lender says you can qualify for a larger mortgage or a shorter-term loan, you may have other ways in which you would rather spend your money.

Then consider how long you plan to stay at your home and what your future spending needs are for children, college, or retirement. Even if you plan to sell your home within five to seven years and want to keep your monthly payments low, keep in mind that with a shorter loan you can build up shares more quickly and therefore generate greater profits if you sell.

Compare loan functions

Compare loan functions

You have to compare your loan options in different ways:

  • Interest rates and costs . Some lenders offer alternative loan terms for a higher fee than standard loan terms, so make sure you know how much you have to pay before choosing a specialized loan period. The interest rates are lower on short-term loans, but the spread between them changes as often as the mortgage interest rate changes. Typically, the difference between a 30-year loan and a 15-year loan is greater than the difference between a 20-year and 15-year loan. Your lender may charge the same interest rate for a 20-year loan and a 23-year loan, so make sure you compare all possible borrowing conditions before you decide which one works for you.
  • Amortization . Your lender can draw up amortization tables for different loan conditions and rates to show you the principal and interest at various points in your loan. With a shorter loan period you start paying your principal faster; In the first few years of a 30-year fixed-rate mortgage, however, your payments are almost entirely interest. A repayment table can show you how much less you would pay in interest if you opt for a shorter loan period.
  • Monthly payments . Your monthly payments vary greatly according to your loan period. Typically, your mortgage principal and interest payment are higher with a shorter term loan, but because the interest rates are lower on those mortgages, the payment may not be as high as you think.

Consider a $ 200,000 mortgage by comparing 30-year and 10-year loan terms. On a 30-year mortgage of 3, 37%, your monthly principal and interest would be $ 884, while your monthly principal and interest on a 10-year fixed-interest loan at $ 2, 75% would be $ 908.

After five years, the loan balance on a 30-year loan at that rate would be $ 178,610, as opposed to $ 105,193 for the ten-year loan. You would save $ 89,280 in interest payments by choosing the 10-year mortgage because of the lower interest rates over the shorter term of the mortgage.

Remember, while paying less interest is a good thing, and if you shorten your loan period, you can pay off your mortgage faster, your mortgage interest deduction is lowered and eventually disappears. Make sure you plan higher taxes if you choose a shorter loan period.

Last word

Last word

When choosing a loan period, bear in mind the importance of other financial goals, such as paying a credit card or debts from student Sara Monday and saving for school or retirement. Also keep in mind that you need the income to be eligible for the higher loan payments associated with a shorter-term loan, so you may not be approved for a short-term loan if your debt-to-income ratio does not comply with the guidelines from the lender. You can always ensure that you pay off your mortgage earlier by voluntarily paying extra on the principal.

How long is your mortgage loan term? Do you wish you had chosen a different term?

Travel the world for free using customer loyalty programs

Do you think you have to travel often to get frequent flyer miles? Think again. In the 2004 movie, Punch Drunk Love, Adam Sandler plays a quirky character who finds a way to earn millions of frequent flyer miles without leaving home to travel with his lover. He realizes that there is a promotion to earn frequent flyer miles with every purchase of Healthy Choice pudding

Quick loans without interest

What is an interest-free loan?

  • This is a type of loan, banking and non-banking lending sectors, to which the interest rate does not apply, no collateral is required, or other guarantees.
  • This loan is also called – loan with 0% commission payment or free loan.
  • This type of loan indicates that the borrower returns to the lender exactly the same amount that it originally borrowed, for example, if it is 100 EUR, then it is 100 EUR that it returns.
  • Loans to which the interest rate does not apply are issued by bank and nonbank lenders, but the terms of issue and use are different.

Bank and non-bank lenders of interest-free loans.

  • Such lenders of the banking sector, the bank offer credit cards with an interest-free credit limit ie interest free credit cards.
    • These cards have an annual payment, a credit limit, a repayment term, a credit vacation, an interest rate, it is logical that the interest-free credit card has all this 0%.
    • It should be noted that if the repayment of the loan was regular and on time, then the lender is entitled to assign an interest-free loan to the same person again and again, without requiring a repeated commission for this.
    • But, if loan payments are not paid on time, they are regularly late with them, then the lender has the right to apply penalties to the borrower.
    • In order to issue a credit card with an interest-free credit limit, you need to choose a bank that meets your desires and needs, and presenting a passport or other documents proving your identity, you need to fill in a questionnaire in it.
  • A completely different interest-free loan is offered by non-banking lending sectors to its new clients when they are given the first interest-free loan.
    • Such an extra is possible only when you take a loan for the first time, if the client wants to take a loan from the same lender again, then the interest rate that is non-bank lenders compared to bank interest rates is very high. In very rare cases, a lender can re-offer an interest-free loan to existing clients, but only with the condition that they have faithfully fulfilled their previous loan commitments with the lender.
    • If you want to constantly evade interest payments, use this advantageous offer again and again, then there is an opportunity to apply for a loan every time to another non-bank lender, using his offer for the first and last time.
    • It must be said honestly that an interest-free loan in this case serves as one of the marketing tools to attract new customers, and this tool really helps, because most potential customers think that such conditions will happen every time they borrow money. We add that at the moment most non-bank lenders use this method to get new clients, but the client in this situation only benefits, because he has the opportunity to choose for himself more favorable loan terms.
    • In order to get an interest-free loan, depending on the conditions of the lender, you must visit it in person, send an application online or send an application in the form of SMS.

What is a quick loan?

  • This is one of the types of short-term loan of the non-bank lending sector, which is also called the Internet or online loan, because it can only be issued online, or is called operational financial assistance in the form of a micro loan. It is necessary to understand that fast loans and non-bank loans are not synonymous, fast loans are only one of the types of non-bank loans.
  • To apply for this type of loan, you do not need to register in advance – this can be done on the website of the lender of your choice by sending a specially developed application for this purpose, where you need to specify personal information and credit information. Registration takes place at the time of sending the application and payment is due for it, which does not exceed EUR 0.01.
  • You can make an application for fast loans at any time, but, observing the law, they can be issued only from 7:00 am and until 11:00 pm Following this period, the non-bank lenders individually organize their working time, both on working days and on weekends.
  • The positive side of this loan, compared with other types of loans, it is – speed, convenience and simplicity. It is possible to receive it within 10 – 15 minutes after the application is sent, which can be sent online or via SMS, without prior registration, no guarantees are needed for receiving it, there is no need to specify the place of work, present identity documents, report, how are you going to spend money.
  • The average term of repayment of such loans is 30 days, but for a certain payment, it can be extended for another 30 days. If the borrower does not comply with the deadlines, the lender has the right to apply penalties, which in most cases are 0.75% to 1% of the amount of the missed payment per day.
  • The amount of this loan can be from 1 EUR to 10,000 EUR, it depends on the specific lender and its conditions. Most lenders to issue this loan each time increase the credit limit of their client, if they have successfully settled their previous loan commitments. These are privileges for honest and conscious customers who are given the opportunity to borrow more and more each time.
  • In order to borrow funds from one of the lenders of fast loans, depending on the conditions, the person must be a citizen of the Republic of Latvia or its resident, aged 18 to 85 years, must receive regular and sufficient monthly income, she must have an active account in a bank that has funds in the amount of one euro cent, it should not have a bad credit history, it should not use these funds to repay other loan obligations.
  • Annual interest rate, i.e. The FSS of this loan is measurable in hundreds, because it is charged according to the formula that was originally created for comparing the prices of long-term banking services, but these are short-term loans. Since the formula has not changed for decades, it cannot be adequately applied to these types of loans for calculating interest rates.
  • These loans are taken for various, often unexpected and urgent needs, for example, urgent daily needs, medical services, for auto repair, for travel and. t. n.

What is interest-free quick loan?

  • Combining the relationship between interest-free and fast loans, we can conclude that most lenders of fast loans offer an interest-free loan when they issue a first loan. Nowadays it is very common, we can say that the first and interest-free loan actually became synonymous. The limit of the first interest-free loan is always less than the limit of the following loans, it is set in order to partially compensate for the financial losses that arose when issuing an interest-free loan. But, compensation is possible only in this case, if the client decides to request the next loan from the same lender, but, as experience shows, in most cases this is the case – if the client is satisfied with the first loan and the conditions associated with it, then the fastest will remain loyal to the company next time.
  • Note that an interest-free loan remains a free loan only in this case, if the client is not late with the payments and pays them, in the opposite case you need to pay the penalty interest that this loan makes already a paid service, besides, the term of repayment of the first loan cannot be extended.
  • If it is terrible to get into endless yoke of debts due to high interest rates, then it is necessary to use an interest-free loan, which is a proven and reliable type of loan without hidden conditions. It remains only to choose a suitable offer and, if necessary, to use it. In order to facilitate the comparison of lenders and the selection process, we have created a table where detailed and detailed information is available about the most popular services of Latvian non-bank lenders.

Why offer “first loan for free”? ”

A free first loan or, as it is also called, an interest-free loan is offered, because in Latvia there is a very big competition between non-bank creditors, and enterprises, therefore, try to attract customers to their services. That is why some of our non-bank lenders were the first to offer this service, although it incurs losses for the lender, but to attract customers this service worked very well and therefore other companies began to use it. At the moment, the situation is this, if the company does not offer this interest-free loan, then it is much harder to attract new customers, and for us, as consumers, it is very profitable. In principle, such a service was formed because there is a lot of competition in this niche and enterprises were ready to do everything to attract new customers. One time,

Does free really mean free?

An interest-free loan is really a free loan and borrowing, for example, 100 EUR, you will have to repay 100 EUR, so, despite the fact that this service seems to be a hoax, it is not, and people have the opportunity to receive this money at no additional charge. The only thing you have to pay is one euro cent, which serves as a payment for registration and it can not be completely attributed to expenses, because it guarantees additional security. Therefore, you can be sure that if a lender offers a loan without interest, then it will be so and this is not a marketing trick.