Ask the Lender – Is a 15 or 30 year term the best choice for me?

When choosing a mortgage term there are a couple of questions that I ask my clients. “What are your long term goals and what payment amount are you comfortable with?”

Being comfortable with your payment in regards to your monthly budget is a huge factor in deciding between a 15 or 30 year mortgage. Typically, the 15 year mortgage has a lower interest rate, but it will result in a higher monthly payment. By choosing a 15 year mortgage you will pay it off sooner and reduce your interest expense by thousands of dollars. Sometimes clients refinance their loans from a longer term with a higher rate to a shorter term with a lower rate and continue to make the same monthly payment as before with the benefit of paying their home off sooner.

The 30 year mortgage will have a slightly higher interest rate, but a lower monthly payment. This will result in a higher interest expense over the long term, but your goal may be to maintain a certain monthly budget and the 15 year monthly payment may exceed that goal. One thing to keep in mind is that Citizens National Bank does not have a prepayment penalty on mortgage loans. Customers may make additional payments or add to their monthly payment which will still reduce the time it takes to pay off the loan and the longterm interest expense. Customers may choose the longer term with the lower payment with the intention of adding extra funds to each monthly payment as they’re able. During these tough economic times they have the piece of mind of a lower required payment if an emergency situation would arise.

CNB’s website offers mortgage planning and calculators to assist you in determining which term may be best for you and estimating monthly payments based upon your situation. Visit www.cnbohio.com/mortgage_index.asp to access them.

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