Understand the Concept Behind Different Term Plan of Mortgage Provided by Financial Institutions



Mortgage loan is availed when a person is planning to acquire a property. The mortgage institution lends a certain amount to the buyer for a particular tenure. Later, the borrower will return money in small amount including interest to the institution every month. The tenure is decided by the institution as well the borrower. As a security, the property is kept in guarantee which is returned after the debt is paid completely. 

There are various schemes available for mortgage amount. Even the tenure of mortgage is most of the time flexible. However, for Americans, the common mortgage scheme is the 30 year fixed rate mortgage plan. All mortgage plans are almost same the only difference is in the tenure. 

If you take a short-term loan of 15 years, your monthly installment amount increases. If you take a longer-term of 30 years, then you can pay a decent amount every month which may not be burden in terms of money, but can become tedious for 30 long years. No matter what loan you take, you should always take mortgage from a reliable institution that keeps all terms and conditions transparent with the borrowers. There are many institutions who convince their pricing and interest rate to be the best, but later you realize that you weren’t informed about certain hidden charges. 

Sammamish provides home mortgage to people. They opened the business in 1992, and for the last 28 years have provided services to the Pacific Northwest. They are unique because they provide loans with special rates with less fee amount. 

Mostly, people prefer the 30 years fixed rate for mortgage plan, but 15 years of tenure also has its own benefits. Let us discuss it below –

Advantage of 30-year plan 

  • Low monthly installments, gives the benefit to borrower to purchase another home or invest in any other property. 
  • Low monthly installments also help borrower to save money, which is necessary for better future and family. 
  • When you have proper savings, you can plan to achieve other goals like buying a car or preparing funds for your daughter’s wedding.

Advantages of 15-year plan 

  • In 30 years, you keep paying interest rate every month, but in 15-year plan, the interest amount is generally less as the term is less. 
  • There is loan-level price adjustment and high mortgage insurance premium in 30-year plan which doesn’t exist in 15-year plan. These fees are applicable only on those who’re paying low amount installment or have bad credit score.
  • The benefit of 5-year plan is that if you’re reaching your retirement period, then you can clear your loan quickly. With short term, you’re forced to save more and pay of early to relax later. 

The interest rate in 30-year plan is higher because it is a risk for the financial institution. 30 years is a long span of time. Within this time frame, any unavoidable circumstances can occur with the borrower. In such case, the bank either will seize the home or force the family members to pay off the debt. This is also a hassle for the financial institution as well the borrower and its family. 

Thus, choose wisely before getting into mortgage plan. Never trust any institution blindly. Check all documents before signing them and always seek help from those who are already paying for a mortgage, since they have more knowledge about the same.