Home Mortgage Planning Can Save You Money- Part I

“Home Mortgage Planning Can Save You Money – Part I”



All financial matters have become more complex as the number of options available to consumers has been increasing steadily over the past few years.  You have more investment options; more credit card options; more insurance options; and many more home financing options.  For example, just 25 years ago, you had less than a dozen choices when you were financing a home. Today there are more than 200 alternatives. This creates a two-edge sword for consumers.  You have the ability to highly customize your financing to suit your specific needs but the sheer number of choices makes it difficult to make a decision. To zero in on your best choice, consider these three questions:


How long do you intend to own the property?  It often makes sense to align your NorthPoint Mortgage with the length of time you intend to stay in your home.  For example, if you’re buying a ‘starter’ home and you plan to buy a bigger home in three to five years, your best choice may be a 5-year Adjustable Rate Mortgage (ARM).  These mortgages provide a lower fixed interest rate for five years and then convert automatically to an adjustable rate that might be higher or lower depending on the level of interest rates at the end of the 5-year term.  If you plan to stay in your home ‘forever’, consider either a 15 or 30-year fixed mortgage.  The 30-year loan will have a slightly higher interest rate but lower payments. 


Where do I think interest rates are headed?  Making the decision process more confusing is the current flux of interest rates.  Over the past two years the Federal Reserve has raised interest rates 17 times.  Only at the last meeting earlier this month did the Fed halt the steady increases.  Is this the end of rising rates?  Will rates move lower over the coming months or years?  Many people believe we are near the top of interest rates.  If you believe that interest rates will be lower in the future, you should consider a low closing cost, interest only or adjustable rate mortgage and plan to refinance once interest rates go back down.  If you believe that interest rates will move higher or stay the same, consider a fixed rate mortgage as discussed above.


What payments will my budget allow? Many people are attracted to the new interest-only mortgage loans because it will allow them to qualify to purchase a bigger home. However, this is usually not a sound choice unless you are certain that you will have a steadily rising income that will allow you to begin making principal payments in the near future.


Avoid Doing THIS!  One of the biggest mistakes I find people making today is using home mortgage financing to fund consumer purchases, such as a car, vacation or other personal expenses.  Home borrowing should be reserved for buying a residence or making home improvements.