It says a certain motto among real estate agents that “the longer the mortgage, the more benefit to the bank. ” A saying that is based on a law that seems to weigh on mortgage loans: ” A higher term higher interest rate.” See romeo-help4u.com for a write-up
It is true? And because?
It is. And we will explain the reason.
Why is it considered that a longer term mortgage is not recommended?
There is a certain writing no agreement on the average duration of mortgages: an average of 30 years. And it is that a mortgage with a longer term might seem more comfortable for the client, but the truth is that the longer the life of a mortgage, the greater the risks that both the bank and the holder run.
In the longer term, the higher interest rate is due to the greater the life of the mortgage, the greater the risks of changes in the working life of the holder of the mortgage loan (who is fired, to change jobs to a lower-income one) incapacitate…) and in your personal life (at an older age, greater risk of health or death). That is to say: there is a greater risk of credit than in default.
Longer term higher interest rate
Another reason for the longer term higher interest rate is that a long-term mortgage implies less profit margin for the bank. And it is that with a long mortgage the bank is forced to deliver capital for a longer time and receive a more spaced return and that it cannot put to work in other loans.
It is better for the bank to put its money in shorter loans, to simultaneously generate returns, than a long-term mortgage loan.