Points to Consider When Shopping for a Mortgage

Posted on: June 17, 2012

When you’re shopping for a mortgage, finding the right mortgage product for you is always a delicate balancing act. Obviously you don’t want to pay too much, but other factors may also be important to your final decision. For example, you might find that a shorter mortgage is right for you, in spite of the higher monthly payment. Or you may decide that you’ll only stay in the home for a few years, so a long-term mortgage with no early payoff penalty is the best route. When you’re shopping for a mortgage, here are a few of the most common things you should consider:


Length of the Mortgage

The best mortgage length may not be a simple equation for you. 30-year mortgages come with a lower monthly payment, but you’ll pay far more in interest over the life of the mortgage. 15-year mortgages have a higher monthly payment, but you’ll save money because of the term, and you’ll also typically get a lower interest rate for the shorter mortgage. It’s important to remember to balance all of these factors when you’re deciding which mortgage product is right for you.


How Long You’ll Stay in the Home

How long you intend to stay in the home plays a big role in which mortgage is right for you. In most cases, if you only plan to stay in the home for a few years; for example, if you’re buying a starter home but you intend to upgrade when you have kids; it makes financial sense to get a long-term mortgage. Generally, the break-even point on a short-term mortgage is around 5 to 7 years. But the specifics vary from case to case, so consult a professional to help you make the best decision. Also, keep in mind things like early payoff penalties, which can cost you more if you sell your home.


Specialized Home Mortgages

There are plenty of specialized home mortgages out there for different purposes. If you wanted to buy land and build a home, for example, you’d need a different type of mortgage than if you’re just buying an established home. First time buyers often qualify for special mortgages or incentives, and you may qualify for other special mortgage products depending on your circumstances. Find out if you qualify for any special mortgage products, and think about whether they might be right for you.



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