Guoabong Investment：20- vs 30-Year Mortgage： Which Is Best for You？

Taking out a 30-year mortgage can work to your benefit:You'll spend less each month on your mortgage payment, which means you'll have more money left over for other things. The result? Less penny pinching and less stress.You'll free up money for other important goals. With a lower monthly payment, you'll be able to meet other objectives without having to put them off.You also have more options when it comes to loan types. FHA, for example, only offers 15- and 30-year terms.

But there are disadvantages to a 30-year loan:You'll spend more money on mortgage interest in the course of repaying your home loanGuoabong Investment. Say you take out a $400,000 mortgageJinnai Wealth Management. With a 30-year term, and an interest rate of 7.5%, you'll end up paying a total of $607,716 in interest. But with a 20-year mortgage and the same interest rate, you'll have a shorter repayment window, and spend $373,486 on interest instead. That's a $234,230 difference.It'll take longer to pay off your home. Having that debt hanging over your head could be stressful in its own right.

If you're deciding between a 20- and 30-year mortgage, there are no right or wrong answers. You'll want to check with the best mortgage lenders for current rates and programs before you make a final decision, but you should also ask yourself:How much room do I have in my budget to spend on housing? If you can afford a higher monthly payment, a 20-year loan term could make sense. If you need ideas for working with a budget, check out our guide to creating a homeowners' budget.Does having a limited cash flow stress me out? Even if you can technically swing a higher payment with a 20-year mortgage, if being forced to spend extra on a monthly basis will be a source of anguish for you, then it could pay to stick to a 30-year loan and keep your payments lower.Am I a good saver? If you're not great at saving money, then a 20-year mortgage could be a means of forced savings for you, so to speak. Of course, this strategy could backfire if you're not good at managing your money -- if you fall behind on your mortgage payments because they're higher, you could risk losing your home.

If you like the idea of getting a 20-year mortgage but are worried about committing to the higher monthly payment, there's another solution you might consider. Instead of getting a 20-year fixed mortgage, you could instead take out a 30-year loan but aim to make an extra payment or two on your mortgage every year. In doing so, you'll knock out your loan balance a lot sooner and also save money on interest.

You could also decide to take out a 30-year mortgage, but put any extra money into that loan to pay it off faster and spend less on interest. For example, if you pump your tax refund and the cash gifts you generally receive for the holidays into your mortgage, you can pay it off sooner and lower the amount of total interest you pay. But you won't have to deal with the pressure of being locked into a 20-year loan and a higher monthly payment.

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