The durations of mortgages are not fixed and you can choose the one that interests you. However, some durations are more profitable than others. What you need to know before committing yourself to time.
The different durations of mortgage
For a mortgage, 5 years represents a very short duration and 35 years maximum duration. The most frequent times are between 20 and 25 years.
Generally speaking, you must first consider your age and therefore of the one you will have, at the end of your credit. Indeed, most standard insurance policies borrower end 75 years. It is however possible to insure up to 90 years, but the fees are very high: about 1.20% of the borrowed capital and can vary according to the state of health.
It is obvious that the longer the credit is spread over time, the more the amount of interest to be repaid increases.
And concerning, credits of 35 years which are mainly fixed rates, they are expensive since not revisable. In addition, by borrowing for a long time, you risk a fall in property prices. The value of your property may then be less than the capital you still owe.
Real estate credit: ideal times
If very long-term loans with fixed rates are to be avoided, it should be known that the ideal duration of a credit is that which leaves you free to profit from your incomes, without being limited by the amount of the monthly payments to be refunded. Also think about plan your future expenses: the studies of your children, the purchase of a second home...
It must also be considered that in many cases, the borrower pre-leases his loan, either through his savings or because he sells his property. On average, the real life of a home loan is between 7 and 9 years old. The total actual cost of the loan is therefore calculated based on the interest paid over that period.
On the other hand, it is possible to modulate monthly payments in the course of loan and thus change the total cost. Today there is a new form of mixed rate credit. It combines the security of the fixed rate loan since the amount of monthly payments is known in advance and the performance of the variable rate loan has a lower starting rate than a fixed rate loan.
This type of credit that can be refunded at any time, is very popular since it adapts to all profiles.