The Finance Blogger

We received a question about 30-year mortgages from a reader and will answer his questions in our next post. They are trying to figure out the best approach in terms of a long term mortgage vs. a short term mortgage, what the issues are and which makes the most sense for this reader in their situation. There are many consumers in this situation about to purchase a home. Should they go with a long term mortgage to minimize the payments? Or should they take a shorter mortgage term with higher payments and less overall interest charges? This is an important question that has long term impacts on their financial life.

Question to Debt Counselor about 30 Year Mortgages

We are about to purchase a home and arrange for a mortgage on this home. We have an option to go for either a short term mortgage of 15 years, a medium-term of 20 or a long term mortgage of 30 years. The 30-year mortgage has the lowest monthly payments. However we pay the most interest with a 30-year mortgage. We are wondering what we should do. We can afford to pay the increased payments of a 15-year mortgage. As consumers we are also a little afraid of a long term mortgage since we will take a long time to build up any equity on our home from our monthly payments. We understand that virtually no equity will be built up in the first ten years of the mortgage, so we are tending to lean towards a shorter mortgage.

Do you currently have a mortgage? :: No, this is our first mortgage

Home/Mortgage Loan Amount :: $150,000

Other Loans, Including Credit Cards:: Nothing significant, we pay our credit cards fully every month. Our car is fully paid for.

Are you employed and for how long:: I graduated from a university and have been working for one year so far.

Your credit rating to be – excellent, fair, or bad? :: Great, we think

Gross Amount Per Paycheck:: $1500 every two weeks

Do you agree to have this information published online, without your PRIVATE information, of course? :: Sure, I guess so

Extra information here please (some detail)::

We have been able to save the down payment that is needed as well in our first year. We currently rent a place and want to get a place of our own and build up equity. This is a first time for us and it is a big deal to take on a huge mortgage like this so we appreciate any advice that you can provide to us.

This is probably the biggest deal of our lives and will affect us for the next 30 years so what should we do? go for a 30 year mortgage or something shorter? We need an answer quickly on this question since we are in the process of arranging for a mortgage and must make a decision within the next few days.

If you have a question about debt, loans , mortgages or other financial situations, please feel free to leave a comment with as much detail about your situation as you can. We will try to answer your question in our next post. For more information about new mortgages, click here.

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