Should You Get 30 Year Home Loans?

One upon a time, a home mortgage taken out for a 30 year period was the preferred method of many home buyers because doing this allowed people to enjoy smaller monthly payments along with an interest rate that stayed put for the entire loan period. Although 30 year loans are still a popular choice, is it the best decision for you?

The Benefits of Smaller Monthly Payments

Even though smaller monthly payments are great, the downside to this is you will have to put thousands of dollars more towards your interest. However, the interest on your home loan is completely tax deductible, which helps offset your total interest costs. And if your financial situation improves during the course of your loan, you are free to pay more money each month in order to get your loan paid off before the 30 years are up. Also, smaller payments mean you can get a home that is larger or has more upgrades.

Comparing a 30 Year Loan with a 15 Year Loan

If you want to know how a 30 year home loan’s interest rates payments compare to a 15 year’s, take the following as an example. If you have taken out a loan worth R100,000 along with a 5% interest rate for 30 years, your entire monthly payment will equal to R536.82. This means the amount of interest you will pay over 30 years will be R93,255.20. However, if you have a 15 year loan with the same terms, your monthly payment will be more at R790.79, but you overall interest will be less at R42,342.20. Obviously, a shorter home loan period will save you a lot of money.

A 30 Year Home Loan Is Still a Good Choice

You can still make a great choice by going with a 30 year home loan by taking the amount of money you would save each month if you had a 15 year loan and put it towards your 30 year loan. If you do not mind waiting longer to build equity, you will be making a sound choice with a 30 year home loan.

What Do Most Home Buyers Prefer?

Among all of the loan periods, the 30 year home loan still retains its popularity as it is the longest loan period available through lenders in South Africa, which lets home buyers enjoy lower monthly payments. This stands to reason that if 40 year loan periods were offered, borrowers would snap them up. Of course, when selecting the loan terms that will suit you the best, you must carefully consider all of your options and ask yourself what financial goals you are trying to achieve. After researching, you may decide your best bet is to go with a 15 year home loan instead of a 30 year one.

However, before you sign any paperwork for a home loan, keep your financial goals in mind, comparison shop among a variety of lenders, and get advice from a professional. Taking the time to properly research can help you save big in the long run.