A guide to 30 year mortgages

Choosing a simple 30 year home loan is the right choice for many home owners, because the interest rate remains the same and the payments are not due in a short time frame. But this could also mean that you pay more on your interest in the long run.

A 30-year home loan has many advantages over other mortgage options. One advantage is lower monthly payments. These lower monthly payments – spread over the life of the loan – give some financial flexibility. For instance, when you have cash on hand, you can make extra principal-only payments on the loan and reduce the length of the loan. The downside is that with a 30-year loan the homeowner will be paying thousands in interest. There are two upsides to this however: 1. The interest amount is 100% tax deductible, and 2. If you make extra principal-only payments the amount of interest you pay will decrease.

It’s clear when you look at the bottom line that a 15-year mortgage is going to save you many thousands of dollars. Comparing a 0,000 loan with a 7% interest rate let’s look at the figures. You would spend 5.30 per month for the 30-year loan, with a total of 9,511.04 going toward interest! With that same loan and interest rate on a 15-year loan, your total interest would be ,799. Your monthly payment would be slightly higher, at 1.11 but it is for 15 years less time, and will save you ,712. Isn’t that worth the 5.81 difference? I think it is!

One reason to choose a 30-year mortgage is the benefit of funds left over for the month. You have several options to make the most of your savings. The sensible thing to do is to make your money work for you. Invest in something that will make the 30-year mortgage worth something in the long run. If not, the fact that you will not have equity as quickly as if you were to choose a 15 year mortgage could be a caveat to the 30 year mortgage choice.

Thirty year home loan rates are the longest home loan available today and remain attractive to home buyers. Experts concur that if they could get a thirty-five or forty year loan they would. When getting a loan, you should take into consideration your financial goals. You should pick the loan plan that best helps you reach that goal. It may surprise you to find that there are other plans more suitable to your goals.

If you are a South African resident then using ABSA homeloans for your 30 year mortgage is the best way to go.