The term length you choose for your mortgage depends on your current financial situation and your long term financial goals. Here is what you need to know when choosing a mortgage term length.

The term length of your mortgage, along with the interest rate, determines how much your monthly payment will be. Term length is the amount of time the mortgage lender gives you to repay the loan. Common choices for mortgage term lengths are 15 and 30 years; however, there are mortgages available with term lengths of 5, 10, and even 40 years.

Which term length is right for you? It depends on your financial objectives. Do you need a mortgage with the lowest possible monthly payment? Do you want to build equity and payoff the mortgage as soon as possible? If you are looking for the smallest monthly mortgage payment possible, choose a mortgage with the longest term length. If you want to build equity and pay off the mortgage as quickly as possible, choose a mortgage with a short term length. Mortgages with a 15 year term are a popular choice with homeowners refinancing their mortgages for this reason.

The interest rate you receive on your mortgage loan is influenced by the term length you choose. Mortgage loans with long term lengths represent more risk to the lender, for this reason your interest rate will be higher with a long term mortgage loan. The opposite is true of mortgages with short term lengths, there is less risk for the mortgage lender and these mortgages come with lower interest rates.

You can learn more about finding the best mortgage or home equity loan, including how to avoid common mistakes, by registering for a free mortgage guidebook.