Is it better to buy a house with a longer or shorter loan term?
Nov 14, 2022
New York
By   Internet
  • Guide
  • Home purchase
  • loan
  • loan term
Abstract: The idea is to get more people out of the old idea of saving money in the bank to buy a house for stability and learn to measure money with time. When you are in a hurry to use the money, you will not suffer from only a suite but can not be liquidated.

Now the real estate dividend period has passed, but there are many other industries to invest in. To put it bluntly, rich people understand that money makes money. They can afford to spend it, and it comes back to them when they're done. Money can be liquid.


It is recommended that you have the ability to pay in full and opt for a loan.


This is why some people prefer to take out a loan when they can afford to pay it back in full. The money that the people hold in their hands is dead money, it is static. If they spend it, they have no money left. If they can't spend it, it's like the same as ordinary paper.


And with the current prices, it's hard for many people to come up with the down payment, and it's almost impossible to buy a house in full. How can you seek better value for money in an expensive value?


By increasing the utilization rate, each extra day of average price will be cheaper, so if a loan can live 20 or 30 years longer than saving a lifetime of full payment for a house, why not?


In addition, inflation and price increases are inevitable. If you bought your home ten years ago, a $1,000 monthly payment might have been a bit much then, but would you still feel the pressure now?


So, the question is, is the longer the better or the shorter the better?


On the surface, the interest rate for a 10-year loan is less than the interest rate for a 30-year loan. However, when considering the reality, we cannot disregard M2 (actual and potential purchasing power).


When M2 grows faster than GDP, economic performance becomes a lack of purchasing power of money. Similarly, at the past rate of M2 growth over GDP, a loan of $500,000 in 30 years may only be equivalent to $200,000 or $300,000 30 years ago.


A friend who is a manager in a bank said bluntly:It is better not to choose a loan of less than 20 years, and don't choose 20 years if you can choose 30 years. Many people give money for nothing!


Why is the longer the loan term the better?


Why do you say you can borrow as long as you want? With the gradual stabilization of the property market, home prices will not fluctuate too much. It is absolutely wise to use a long-term loan to get more liquidity. No matter where you invest your money, you can effectively offset the interest on your mortgage.


People who choose to average their capital:The higher the repayment upfront, the lower the repayment later. It's better for early repayment, but the upfront pressure is too high, so this type of repayment is better for people with higher income or some savings.


People who choose equal interest: The monthly repayment amount is equal, and the interest paid in the early stage is the principal paid in the later stage, so it is very unfavorable to pay off the loan early.