Before purchasing your next home it’s important to ask yourself, “how long do I plan to live in this house?” 30-year fixed rate mortgages are more popular than their 15 year and adjustable rate counterparts due to consistent payments throughout the life of the loan. However, a 30-year mortgage may not be your best option.
If you are a first time homebuyer or life circumstances such as a job transfer are in the near future, an adjustable rate mortgage could be a better fit. Adjustable Rate Mortgages (ARM) usually are available so that the interest rate adjusts every 3, 5, or 10 years. The rates usually adjust 1-2% and have a 6% rate cap for the life of the loan. If you know you’d like to purchase a new home or will be moving within 5 years, a 5 or 7 year ARM may offer a lower interest rate than a 30-year fixed mortgage.
If you do decide to take the 30-year route, you can still save on interest by paying biweekly. If your mortgage payment is normally $1800 a month, instead of paying monthly pay $900 every two weeks. Doing this will result in one extra payment a year which saves you so much in interest that you can pay off a 30-year mortgage in only 23.1 years!
There are many flexible options for mortgages today. I can connect you with a trusted lending partner that will discuss your options and help you find the mortgage that will best suit your needs.