Term length is the amount of time your mortgage lender allows you to repay the loan. Choosing the right term length for your financial objectives is an important part of mortgage refinancing. Here are several tips to help you choose the right term length for your financial goals.

The most common reasons homeowners have for mortgage refinancing is to get a lower interest rate or cash out equity in their homes. Other homeowners refinance their mortgages to change the term length of their loans. Term length is the duration of the mortgage and directly affects the monthly payment amount. When mortgage refinancing you have the option of extending or reducing the term based on your financial objectives for the loan.

Mortgage Refinancing to Extend the Term Length

Homeowners in need to the lowest monthly payment possible have the option of extending their term length. Traditional mortgages come with term lengths of 30 years; however there are now 40 and 50 year mortgages to pick from. Choosing a mortgage of this duration has an advantage over interest only mortgages and will give you a similar payment with significantly less risk.

Mortgage Refinancing to Shorten the Term Length

If your financial goal is to pay off the mortgage as quickly as possible, you can achieve this by shortening your term length. Mortgage refinancing with a 15 year term length is a popular choice for people wanting to build equity as quickly as possible. When shortening the term length of your mortgage loan your payment amount will go up; however, you will pay less to the lender in total finance charges.

You can learn more about your mortgage refinancing options, including common homeowner mistakes to avoid by registering for a free mortgage guidebook.