Your Loan Options

You may want a low interest rate for the long term.  Since you will be making loan payments for many years, your best strategy may be to get a fixed-rate home loan and pay points to achieve the lowest possible interest rate.   If you are financing more than 80% of the purchase price of your new home, this option may not benefit you. 

If you plan to sell or refinance your home in several years…

Avoid points and closing costs, since the difference in interest payments does not make it worth the trouble, in comparison to what you will have to pay “out of pocket” during the close.  Additionally, try to get a lower down payment.  An adjustable rate mortgage (ARM) is typically a good option for an established period of time as interest rates are typically lower than fixed rates during the initial established period lowering the monthly payment.

If you want to budget a fixed payment each month…

A fixed rate home loan offers you a principal and interest payment that remains fixed throughout the life of the loan.

If you are comfortable knowing that there may be periodic changes in your interest rate, but you want to buy a better home now…

The adjustable rate mortgage is a very good solution for those whose income will grow, those who will refinance quickly, and those who are comfortable making a higher monthly payment in a few years if interest rates rise or intend to refinance.  Another option for this type of situation is an interest only loan.  This type of loan only requires you to make an interest payment every month.  You may pay down the principal on the loan at your discretion.

This information is provided to you for general information only.  It is not intended to provide any legal, financial or specific advice or recommendation.  Contact your mortgage consultant for specific program guidelines and qualification criteria.