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How does the length of my mortgage term impact my monthly payment and overall cost of borrowing?

Curious about Mortgages

How does the length of my mortgage term impact my monthly payment and overall cost of borrowing?

The length of your mortgage term can have a significant impact on your monthly payment and the overall cost of borrowing. A longer term generally means lower monthly payments, but a higher overall cost of borrowing due to the additional interest paid over the life of the loan. On the other hand, a shorter term means higher monthly payments, but a lower overall cost of borrowing as less interest is paid over the life of the loan.

For example, if you have a 30year fixedrate mortgage with a $200,000 loan amount and a 4% interest rate, your monthly payment would be around $954. If you keep the loan for the entire 30year term, you will end up paying a total of $343,739, which includes $143,739 in interest.

However, if you have a 15year fixedrate mortgage with the same loan amount and interest rate, your monthly payment would be around $1,479. If you keep the loan for the entire 15year term, you will end up paying a total of $266,289, which includes $66,289 in interest.

So, while a shorter term can save you money in the long run, it is important to consider your budget and financial goals when deciding on the length of your mortgage term.

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