Getting a mortgage is more than a one-time event. It’s an important ongoing part of your lifelong financial strategy, and it should change and evolve with you and your family’s needs, goals and circumstances. Whether you want the smallest mortgage payment available, to be debt free as soon as possible, to minimize the cost of your loan or to have the most cash available to save, spend or invest elsewhere, each will require a different mortgage solution. Here are some guidelines to consider at each stage of life when deciding what direction to take with your mortgage.
If you’re a first-time homebuyer with limited income or savings, a mortgage with small payments is likely most important to you. The popular 30-year fixed-rate mortgage is often the best choice for a low monthly payment since the costs are spread out over three decades. You may also qualify for low-down-payment options requiring as little as five, 3.5 or even zero percent down, although putting less money down typically results in a higher monthly payment.
As your family matures and its income earners advance in their careers, different mortgage types may become more advantageous. With more financial resources available, you may want a mortgage with a larger monthly payment so you can save on interest costs and build equity faster. Choosing a 15-year mortgage rather than a 30-year one will require a higher monthly payment, but you’ll obtain a lower interest rate, and the interest you’ll need to pay will only accrue for half as long. If you plan to move or pay off your home within five, seven or 10 years, an adjustable-rate mortgage can offer an even lower interest rate over those periods.
It will be harder to obtain a new mortgage after you retire and lose your earned income, so pre-retirement is an important time to decide on a mortgage strategy for your golden years. You may wish to increase your payments to pay off your home faster, or you may wish to get cash out of your home through either a home equity loan (second mortgage), a reverse mortgage or a cash-out refinance.
By selecting the right mortgage solutions as you move through life, you can help ensure a secure and prosperous lifestyle for yourself and those you love. Contact us for a free mortgage consultation to examine your current situation and mortgage and see if you could benefit from a change in strategy.