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Mortgage Term Options For Rhode Island Homebuyers

By Elizabeth R. Elstien

When buying a home, there are options for the length of a mortgage loan. With today's extremely low interest rates, choosing the right loan term (10-, 15- or 30-years) for your needs and finances can help save you money.

Interest rates vary depending on type of loan (VA, FHA, conventional) credit score and down payment amount. Interest rates are inversely proportional to the down payment and credit score: the higher the down payment and credit score, the lower the interest rate. For example, recent interest rates in Providence, Rhode Island for a 30-year fixed loan range from 3.427 to 4.225 percent for 20 percent down and a credit score of 740 or higher. With a lower credit score of 660 to 679 and 5 percent down, interest rates range from 3.900 to 4.375 percent. This difference can equate to a significant amount of money during the length of the loan.

Is the traditional 30-year mortgage right for you? If you have a large down payment, excellent credit to get the lowest interest rate and can afford a potentially higher monthly payment, 15- or even 10-year mortgage loans may be better options. The 10-year loan will have the highest monthly payments, but that can be offset with the short loan term and less money paid out as interest. If you have a lower down payment and a credit score that is less than stellar, you may need a 30-year mortgage loan. This will mean lower monthly payments than 10- or 15-year loans but higher money paid out as interest over the entire 30 years of the loan.

Weigh your options with your lender or financial manager and decide which mortgage loan term is right for your situation. Remember, the goal is to pay for the loan in full and own the home outright without going into foreclosure.

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About The Author

Elizabeth R. Elstien has worked in real estate for over 15 years as a real estate...

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