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I current have a mortgage with less than 14 years on the term with an outstanding balance of approx 100k.

I will be moving house in the next few months, but the house I move to (purchase) will only be temporary (for maybe 2 - 3 years). The next house be more expensive so will probably increase the mortgage to 150 - 200k.

What would be the most appropriate mortgage term?

Initial thoughts suggest another short-term mortgage, i.e. 10 - 15 years, as this will build up more equity, but then if I take a longer term one (i.e. 30 years), it will give me more disposable income, which I can save and/or invest.

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  • For the house you'll only be in for 2-3 years?
    – RonJohn
    Feb 8, 2018 at 14:39
  • @RonJohn Yes...
    – Cloud
    Feb 8, 2018 at 14:59
  • @Cloud - you asked a nearly identical question today, Should I max or min my affordability on a new home?. Today's version has a bit more detail, and this one is also a candidate to close as a duplicate of an older question. Please note, duplicates of your own question is frowned upon, next time, just edit to add detail to the original.
    – JTP - Apologise to Monica ♦
    Feb 9, 2018 at 15:32
  • @JoeTaxpayer Not at all... this question is about the term... today it was about the actual mortgage amount (nothing to do with the term)
    – Cloud
    Feb 9, 2018 at 15:40

3 Answers 3

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The shortest term mortgage is normally the best mortgage provided it is affordable. Generally speaking the shorter the term the lower the interest rate. The shorter the amount of time money is borrowed, the less time compounding interest works against you. Given the large size of home loans, the more you can less this then the better one is off financially.

Given the lack of details, it is difficult to provide specific advice except for this: You may want to consider renting. Here in the US it is expensive to transact real estate and as such one needs to achieve significant appreciation in order to break even on the short term ownership of a home. As a rule of thumb, less than 5 years, one is often better off renting.

So you may want to look into renting, instead of purchasing for your one to three year temporary residence.

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    Spend some time researching the market in the area before making a rent/buy decision based solely on time. If you're moving to a high-growth area that seems likely to continue growing, then buying might still be very lucrative. Also check out the price to rent ratio in the area, in some places you'll pay significantly more than mortgage to rent, in others you'll pay significantly less.
    – Hart CO
    Feb 8, 2018 at 15:33
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I always recommend a 15 year mortgage. Often it will come with the lowest interest rate available, and it builds equity quickly.

I don’t recommend purchasing a house that you will live in for fewer than 5 years if you are spending 6% on commissions to buy and sell, but in some hotter markets it makes sense. (My house appreciated by 15% in the last year. It wouldn’t be a good idea right now for me to sell, rent for a couple of years, then buy, but it would have been fine in the prior decade.)

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  • This is important. Between the buying and selling closing costs, you're going to lose close to 10% of the value of the home, then there's the cost of all the little things you're going to end up fixing along the way. Short-term home buying is expensive.
    – JPhi1618
    Feb 8, 2018 at 15:53
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Given the expense of mortgage closing costs, you'll take a hit with selling so quickly.

http://moneyning.com/housing/the-five-year-rule-for-buying-a-house/

The first hit is your closing costs. Every time you go through closing — buying and selling — money hits the table.

And you take a second hit when you look at your mortgage statement to see exactly where your monthly payments are going. ... Usually, it isn’t until you’re about five years into paying down your mortgage that you’ve made enough progress on the principal to make it a better deal than paying rent each month.

Now, if you plan on keeping that house and renting it out once you move, the calculus changes.

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