Long Term Home Loan Advantages That You Should Not Ignore

April 5, 2020 Off By admin

If you have eventually figured out your dream house, you have come to the next important stage of realizing that dream house. You have to make a decision whether to go for a long term home loan or a short term home loan. Before making a decision given that you can also afford to avail of the latter loan term, you may like to look at the main advantages of a long term loan.

Availing of a long term home means paying a lower monthly amortisation. More often, the maturity period for a long term loan can be 25 or 30 years. A long term loan in a way provides you a sense of security since there is much lesser pressure in tightening your budget. Definitely, the trade off is that you must shoulder the load of paying a higher interest rate. The accumulated interest payment for the whole loan duration is significantly higher compared to a short loan term.

You must not solely look at the total amount that you expect to cash out. Note that if you can take a short term home loan but you opt for a long term loan, you possess usable savings which you can invest on high yielding investment endeavors. This makes sense if you earn more from your investment than the savings you generate from paying the lower interest of a short term home loan. Your sense of entrepreneurship then must come into play to allow your funds to grow significantly.

Choosing a long term loan comes down to the benefit of shelling out lower monthly amortizations. It allows you better flexibility to deal with your finances and somewhat offers you a buffer in case of financial dislocation. If there is one major stumbling block in availing of a long term loan, it is the built in high interest value. However, if you opt for a long term loan over a short term loan, you have some “savings” which you can subject to investment opportunities. If you invest your money properly, the yields can cancel out the high interest rate from a long term loan if not even improve your financial position.