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Short Term Loans

If you choose a fixed rate mortgage as your principal mortgage, you have a variety of options concerning the mortgage’s term. The mortgage’s term refers to the amount of time used to calculate the loan’s monthly payments. Unless you choose an option like a biweekly mortgage, or choose to make early payments, the loan’s term will also be the amount of time it takes to completely pay off the loan.

Selecting a shorter term carries distinct advantages. A ten-year, fifteen-year, or even twenty-year term can save you a lot of money in interest payments in the long run. Though monthly payments are higher on these loans, you will pay the loan off more quickly and save money.

Choosing a short-term for your principal mortgage can also be thought of as an investment, though it does not work in the same way as a traditional investment. Traditionally, investments consist of one large sum that produces smaller returns over time, that hopefully add up to surpass the original investment. Short-term mortgages, on the other hand, consist of smaller payments each month with the result of a large return at the end of the investment.

The investment amount is the difference between the monthly payment on a similar loan (identical interest rate and fees) with a longer term and your loan. When you decide to move and sell your home, you will really see the return on your investment. Because you have built so much equity through your higher monthly payments, you will take home much more of the selling price than you would with a longer loan.

Your actual return on your investment will depend on your loan’s interest rate and the amount of time you wait before selling. Shorter term loans also help you save because they require lower mortgage insurance premiums than loans with longer terms. This allows you to realize some immediate savings through choosing a short term loan. If you have the extra money to pay each month, you might consider going with a short term loan instead of another investment.


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