When you’re buying or refinancing a home, the mortgage that’s right for you may depend on where you are in your life. Your mortgage is a part of your lifelong financial strategy, and it should change and evolve with you and your household’s needs, goals and circumstances. Whether you want the most affordable payment available, to minimize interest and fees or to access cash for saving, spending or investment, each objective may 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 the most affordable payments is likely 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 and the fixed principal and interest payment will never change over the life of the loan. If you have limited cash available, you may also want to make a low down payment, such as 5%, 3% or even 0% down if available and ask if down payment assistance is an option to further reduce your out-of-pocket home purchase costs.
As your household 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 bigger monthly payment, such as a 15-year loan rather than a 30-year one, so you can save on interest expenses and build equity faster. If you don’t require a loan with a fixed rate for its full term, an adjustable-rate mortgage may offer even more interest savings. Lastly, if you’ve built up equity in your home, you may be able to take some out with a cash-out refinance to pay for a renovation, college tuition, debt consolidation or other big expense.
It may be harder to obtain a new mortgage after you retire and have no 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 loan faster, take equity out of your home as cash or even halt your mortgage payments entirely with a reverse mortgage.
By choosing the right mortgage solutions as you move through life, you can help ensure a secure and prosperous lifestyle for yourself and those you love. Get in touch for a free mortgage consultation to analyze your current situation and mortgage and see if you could benefit from an updated home financing strategy.