What should the length of my mortgage term be?

The length of mortgage terms varies widely - from six months right up to 25 years. Generally, the shorter the term, the lower the interest rate. The longer the term, the higher the rate. While four or five year mortgages are what most home buyers typically choose, you may consider a short-term mortgage if you have a higher tolerance for risk, if you have time to watch rates or are not prepared to make a long-term commitment right now.

Before selecting your mortgage term, answer the following questions:

1. Do I plan to sell your house in the short-term without buying another? If so, a short mortgage term may be the best option.
2. Do I believe that interest rates have bottomed out and are not likely to drop more? If that's the case, a long mortgage term may be the right choice for you. Similarly, if you think rates are currently high, you may want to opt for a short to medium length mortgage term hoping that rates drop by the time your term expires.
3. Am I looking for security as a first-time home buyer? Then you may prefer a longer mortgage term, so that you can budget for and manage your monthly expenses.
4. Am I willing to follow interest rates closely and risk increased mortgage payments following a renewal? If that's the case, a short mortgage term may best suit your needs.