What’s the Most Sensible Mortgage Option for Me?

Mortgage in UtahThere are literally hundreds of mortgage products you can choose from so it can be somewhat daunting to find one that best suits your requirements. So before you even approach potential lenders you have to figure out what you can afford and what you really need.

According to AmericanLoans.com, to start, answer the following…

  • Where do you picture yourself in the next five to 10 years?
  • How long are you planning on living in your home?
  • Do you need to have money on hand for future investments?
  • Do you want or need to make improvements on your home?
  • Do you want to remain debt-free?
  • Can you really afford financial risks?

Once you’ve answered these questions, consider the following when evaluating your mortgage options:

A Longer Term for Your Loan

This means a term of 30 years and above. Put simply, the longer term equals lower monthly payments, but higher interest.

An ARM or Adjustable Rate Mortgage

This is ideal if you need to have some on hand cash or want a lower interest rate. For the first several years, your rate will be fixed and then start to float. Know however that your payments will increase or decrease according to market conditions, once floating starts. This option is sensible for those who relocate every few years since if rates increase, they can sell and if rates drop, they can refinance, adds a mortgage officer in Utah.

Consider an 80-20 Home Loan

The average loan finances the initial 80% and a second mortgage with increased interest funds a 20% down payment. You also do away with PMI or private mortgage insurance, which is a standard requirement for properties purchased without the 20% down payment.

Consider Skipping Principal Payments

You can reduce your payments each month by as much as 20% to 25% in the initial years — usually five to 10 years — and likewise qualify for a larger loan. However, know that you get a huge jump in monthly payments when this period of interest-only payments concludes because you then start repaying the principal payments you skipped for the first several years of your loan term.

Keep in mind that taking out a mortgage is a big financial decision. So give yourself sufficient time to compare your options, mull over the pros and cons of each, do the math, shop around, and formulate a plan before you apply for a mortgage.