If you dont have enough funds on hands to make hefty monthly payments towards a short term loan, a long term mortgage allowing smaller payments might be the answer for you. On top of this, if you are averse to risks and believe in playing it safe, a long term fixed rate mortgage which has no surprises (in the form of fluctuating interests) might be what you are looking for.

Generally long term loans are for 30 years, though there are some banks which offer 15-20 year loans. Compared to a 30 year mortgage, a 15 or 20 year mortgage interest rate is lower by .5% - .25%. However, the total monthly payments would be larger than the 30 year mortgage because you have to make larger monthly payments to pay off the loan in a shorter time. But the overall amount paid for a 15 or 20 year mortgage will be less than a 30 year loan for the same amount. Studies show that 15 year fixed rate mortgage is the most popular choice for re-financing the 30 year fixed rate mortgage. Effectively, shorter loans mean larger monthly installments and lower interest, whereas longer term loans mean smaller installment and higher interest rates. You should decide which option is more suitable depending on your financial resources. Also, the down payment for a long term fixed mortgage is considerably lower.

But remember, youll have to pay higher interest towards the price of the security offered by fixed interest mortgages. Here, the lender is bearing the complete risk of interest fluctuations. If there is a rise in the rates he loses out on profit because he agreed to charge you a fixed interest. A higher interest is the premium he collects from you for bearing this risk.

You need to have a steady job or any other source that gives you regular income to opt for the fixed rate mortgage. Otherwise you might have problem making the fixed monthly payments and end up paying penalties. Another problem is that since the interest rate is higher than other mortgage plans, qualifying for a large loan might be difficult. Especially, if it is a shorter loan than 15 or 20 years.