Did you know that the most popular home loan term in the United States is for 30 years? Having 30 years to pay off a home might feel like an eternity, which is why learning about a 5 year mortgage option might help you make a better decision on the mortgage loan term that’s best for you.
Keep reading to learn more about 5 year mortgage loans.
One of the pros of opting for a 5 year term vs the more common 30 year term is that you will save a ton of money. With a 5 year loan, you will have a low interest rate which means that you will pay much less in total when your home is paid off.
The longer the loan term the more you can expect to pay in interest. You can learn more here about the current landscape of the real estate world.
One of the biggest drawbacks of a 5 year loan is that the monthly payments are much larger than loans that are spread out over more years. The payments are usually double and triple the amount of a 15 or 30 year mortgage loan.
Because the monthly payments are much higher, these loans are pretty rare. Most lenders will ask for proof of income to make sure that you can make large enough payments before they offer you a five year loan.
5 Year Refinance
If you have an old loan that is nearing the end of its life cycle with 7-10 years left, you can look into refinancing to a 5 year term to take advantage of lower interest rates. Making the switch can save you thousands in payments and interest especially if you have a high-interest rate at the moment.
Getting the Best Rates
You can shop around at credit unions, community banks, and regional banks for a 5 year refinance mortgage. Everyone will have different promotions and specials to choose from, so it is a good idea to shop around before deciding on one lender.
You can also talk to a mortgage broker about finding the best rate because they have access to different lending sources. They can help match you up with the perfect lender for your needs. The great thing about using a broker is that it will save you time and headaches because they know who to contact and understand the loan lingo.
Feeling Like a 5 Year Mortgage Pro?
Now that you know more about taking out a 5 year mortgage and the ins and outs associated with this loan, you can make an informed decision whether or not this is the right loan term for you. If you can afford to pay those higher monthly bills, it might be totally worth it because you will own your home sooner rather than later.
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