What Are Your Most Cost-Effective Home Financing Options?
Although many housing markets across the country are still feeling the effects of the subprime mortgage crisis, homebuying rates continue to rise -- driving up prices in hot communities. If you've recently transitioned from wishful thinking to house-hunting in earnest, you may be wondering which financing options will allow you to purchase the home of your dreams while still leaving you a bit of cash in pocket to finance improvements or redecorate. What should you do to ensure you're getting the best mortgage rates and not leaving money on the table? Read on to learn more about financing your first home purchase.
What are the most cost-effective ways to finance a home purchase?
Because few Americans can afford to plunk down tens (or hundreds) of thousands of dollars in cash for a home, most buyers will obtain a mortgage -- repaying this money over a longer term and granting the lender a security interest in the home purchased. Mortgages can run the gamut from short-term adjustable rate mortgages (ARMs) to long-term fixed rate mortgages and everything in between.
In general, the longer your loan term, the more interest you'll pay over the life of the loan. However, you'll also to take the time value of money into account before writing off a long-term mortgage as too expensive. By spreading your monthly mortgage payments over a longer term, your actual payment amount will decrease -- giving you additional cash flow to invest in home improvements, tax-sheltered retirement accounts, or other sources of future income. If you're able to secure a low interest rate and invest leftover funds into the stock market over your mortgage's term, you may find that you can more than recoup the amount of interest paid to the lender.
In other cases, an adjustable-rate mortgage may be more appropriate for your needs. If your job requires you to move frequently, or if you suspect you'll upgrade your starter home once you expand your family, you may not expect to keep your first home for more than a few years. Selecting an adjustable-rate mortgage that will reset long after you expect to have moved on to another home can allow you to secure a lower interest rate than if you'd selected a fixed-rate mortgage instead.
What else should you consider when investigating home financing options?
Navigating the variety of mortgage products available and determining the right option for you can be a complex calculation, particularly for those who haven't gone through the purchasing process before. Seeking the advice of a loan officer, like those at Assurance Financial, can be invaluable when making this decision. Your loan officer should be able to raise points you may not have considered, and will run a variety of scenarios to help you determine which makes the most financial sense for your family.
Share