How Long Should My Fixed-Rate Mortgage Be

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You’re considering buying a home, and you’ve found one in your price range that fulfills all the other requirements on your list. You’ve even decided that you want a fixed-rate mortgage since the interest rates are low enough to justify your decision. Congratulations! Now, you’re starting to wonder how long your new fixed-rate mortgage should be.

What Is a Fixed-Rate Mortgage?

First, a little background. Once you’ve purchased a home, you’ll have a mortgage loan to pay every month. There are three main types of mortgage loans you can acquire: a fixed-rate loan, an adjustable-rate loan, and a combination loan (sometimes called an alternative loan). A fixed-rate mortgage loan is what you think of when someone says “mortgage.” It’s the standard loan for homeownership and what we’re going to talk about here. In a fixed-rate mortgage agreement, you pay the same set amount on your mortgage every month.

The main advantage of a fixed-rate mortgage is that you don’t have to worry about the interest rate on the housing market. Even if the interest rates fluctuate, your payment stays the same, through the length of the mortgage. You’ll always know what your housing costs will be through the entire loan agreement, and you already know when the loan will be paid off (15, 20, or 30 years from now). Since your rate is fixed, there’s little risk associated with this kind of loan for the borrower.

However, on the flip side, the disadvantage of a fixed-rate mortgage is that you might get your loan at a time when interest rates are high. You could be locked in at a higher rate and pay a lot more money over time. If interest rates fall while you’re paying on your loan, you can lose out on some potential interest savings. The good news is that you’re able to refinance a mortgage in order to get a lower rate when this happens.

So How Long Should You Have This Fixed-Rate Mortgage?

Here at Rivermark Community Credit Union, we offer mortgage terms with lengths at 10, 15, 20, and 30 years. The longer the term of your mortgage is the lower your monthly payments will be. The tradeoff is that if you have a longer term, you’ll end up paying more in interest. If you get a shorter term, your monthly payments will be higher, but you’ll pay off more of your mortgage quicker and will pay less in interest (and less overall).

Once you know what your budget is, you should consider how much you’re willing to pay on a monthly basis for your fixed amount. If it’s important to you to pay off your house quickly, and if you have the cash flow to do so, it would be a good idea to ask for a shorter fixed term, such as a 10- or 15-year mortgage. You’ll pay less in interest and pay off the loan entirely much quicker this way.

However, if you’d feel more comfortable having more wiggle room in your bank account every month, or if you’re looking at buying a more expensive house, it would be a better idea to look at getting a longer term, such as a 30-year mortgage. 

What Are the Qualifications for Getting a Fixed-Rate Mortgage?

One question that comes up occasionally is how old you must be in order to qualify for a 30-year mortgage. Older homebuyers may think they aren’t eligible since they’re 60, 70, or 80. The truth is, banks, credit unions, and other financial institutions cannot discriminate according to your age. Age is one of the protected classes under the federal antidiscrimination law. If you meet all the other requirements, you can conceivably have a 30-year mortgage approved on your 100th birthday. 

On the opposite end of the scale, in order to qualify for a loan of any kind, in most states, you must be at least 18 years old (or the age of majority is in your state). Signing a contract to buy a home is a legally binding agreement, and your signature is void if you’re not at least 18. However, the most central concern at that age is whether you can make the payments for the house. Affordability is a point anyone should be prepared to think about carefully before purchasing a house—it could be the largest asset you ever buy.

Additional Resources

If you’re a first-time homebuyer, Rivermark has resources to help you get your dream home. The home-buying process can be very confusing, and you might feel trepidation at putting down money for such a large purchase if you don’t feel like you have all the information you need. That’s why credit unions have experienced mortgage officers to guide you through the process. You can start your loan application process online. Once you’re preapproved, you can show realtors that you’re a serious buyer, which can speed up transactions once you find your perfect home.

Remember, no matter your age, if you make a larger down payment and have a higher credit score, your mortgage rate will generally be lower. Make sure to pay your bills on time, pay off your other debts quickly, keep your balances low on your credit cards, and don’t close unused credit cards. These pointers can help keep your credit score from dipping. Keep up those saving tips too. Make automatic payments every week or month into a savings account—you’ll be surprised at how soon it grows, and then you can turn around and add it to your down payment. A higher down payment means a lower monthly payment, so every bit counts.

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