What’s the Average Mortgage Length?
There are several different options when you are shopping for a mortgage. There are the standard fixed rate mortgages with any term from 8 years to 30 years. Also, there are adjustable-rate mortgages (ARMs) as well. What is the right mortgage for you.
First, you have to start with how long do you expect to be in the home and assess your options from there. In the U.S. the average mortgage has a life of 7 – 8 years. Why? Quite simply, life happens. People either grow tired of their house, their families grow bigger, and they need a larger home or couples go through a divorce. The other major reason is if interest rates fall, and you have an opportunity to move to a lower rate and payment.
The standard mortgage and most sought after is the 30-year fixed. The reason is it provides the lowest, affordable payment for the time you are in the house. The other sought out mortgage is the 15 year fixed. Consumers move to this type of mortgage because they have a desire to pay off their mortgage more quickly and usually have the income to qualify and make the higher payment.
If you know you are not going to be in the house for a long period of time you should assess a ARM. The most prevalent ARMs in the market place are 5, 7 and 10 year. If the starting rate on those products are much lower than a fixed, this could be an attractive option. Why pay the premium of a higher rate on a fixed mortgage when you know the probability of being in the house and mortgage is low.
As always, consult with you trusted, mortgage professional to learn about all your options and select the best mortgage for you and your situation.