What is a Mortgage Term?

The specifics of mortgage terms and preparing for mortgage commitment

The term of a mortgage is how long a homeowner agreed to make payments on the house purchased. This is one of the factors in determining the final monthly mortgage bill on a home. Along with the money borrowed, the owner must also pay an agreed interest rate, which is added into monthly payments.

How Long is a Mortgage Term?

A standard mortgage is 25 years, but this is not set in stone. A person can take out a mortgage for 30 or 40 years if that is what they are most comfortable with. It is normally advised to try and pay off a mortgage as soon as possible in an attempt to avoid a large interest payment. An effective way to pay off a mortgage before the end of its term is to overpay on the monthly bill, which will clear debt quickly and avoid a larger interest payment.

How to Extend or Reduce A Mortgage Term

You can also extend or reduce a mortgage term by negotiating with the initial lender. Keep in mind, lenders are hesitant to extend a mortgage for older clients because they usually prefer the debt to be paid off before a client goes into retirement. If you plan on shortening a mortgage term, be prepared to submit documents that prove a homeowner can afford the extra payment. A homeowner can also speak with a mortgage advisor to assess if reducing or extending their existing mortgage is the best financial decision.

When adjusting the term of a mortgage, there are many variables to consider that will alter outcomes 25-40 years in the future. Understanding the impact of an interest rate, along with any other fees administered by a lender is crucial in creating a strong, long-term financial plan. It is always encouraged to speak to speak to a professional when feeling confused about such serious decisions, so mortgage advisors exist to prepare homebuyers for this huge lifetime commitment.