Term length is the amount of time you have to repay your home loan and along with your refinance rate determines your payment amount and amortization schedule. If your goal is to pay off your home loan as quickly as possible, choosing a longer-term length can get you there at the expense of a higher monthly payment. Here’s an article on TheTruthAboutMortgae.com:
Before you set out to snag the lowest rate on your purchase mortgage or refinance, you’ll need to decide on (or at least narrow down) a mortgage term. By “mortgage term,” I mean the length of your mortgage. Why does it matter? Well, your mortgage payments and the amount of interest you pay will be determined, in part, by the term of your mortgage.
The most common mortgage term lengths are 15 and 30 years; however, there are 20 and even 40-year mortgage refinance options available. Keep in mind the longer your mortgage term length the more you’ll pay the bank in finance charges over the lifetime of your home loan.
If you’re concerned about bank finance charges you’ll want to pay close attention to the loan origination fee and closing costs that you’re paying for your mortgage refi. One of the most common mortgage mistakes is overpaying the loan origination fee. Keep in mind when shopping for a mortgage broker that a reasonable amount to pay is one percent of your loan amount.
You can learn more about avoiding mortgage refinancing pitfalls like lender junk fees by checking out my free Underground Mortgage Videos.