Q. There are so many options now to choose from in financing our new home that we are totally confused. Each alternative seems to present both pros and cons to us. How can we make the best possible choice?
A. Although your mortgage loan officer will ultimately assist you in tailoring a mortgage to meet your needs, there are a few basic things to be considered in the meantime.Basically, all mortgage products are variations on two basic types: fixed-rate mortgages and ARMs (Adjustable Rate Mortgages). For the long run, you will probably be better off with a fixed-rate loan (in most cases), provided you can get a favorable rate. However, an ARM is a better choice in many short-term scenarios.
In designing a mortgage to suit your individual situation, consider the following:
- Initial investment available (down payment and closing costs)
- Household income - today, and how it will change in the future
- Reason for buying the house - growing family or saying goodbye to the kids as they go off on their own
- Planned length of occupancy - potential job transfer in the near future, or planning to retire there
- Tax consequences - 10- and 15-year mortgages will provide less interest to deduct as you pay more on principal in a shorter period of time.
- Current age - many changes can transpire over the year.
- Career expectations, including the employers' long-range plans - goals, career ladder, etc.