When it comes to choosing a home loan, most prospective buyers think of getting a 30-year mortgage with a fixed interest rate. While this is a popular choice, there is actually no single loan that fits all or most buyers. The right loan will still depend on your unique situation—all will include your income and debt status, as well as your financial goals.
ARMs Does Make Sense
Adjustable-rate mortgages (ARMs), for instance, have a bad reputation among many borrowers, but they actually make sense in specific situations. An ARM is worth considering if you can’t afford a house with a fixed-rate loan, which has a slightly higher interest rate. Altius Mortgage Group and other mortgage companies in Salt Lake City also note that ARMs make sense if you plan to relocate soon or sell the house before the rates fluctuate.
The Appeal of a 30-Year Mortgage
What makes a 30-year loan a popular choice is that it offers a longer repayment term, which then helps buyers qualify for lower monthly payments or even a pricier home. With smaller payments, it’s also easier to qualify for this type of loan. The main setback is you’re likely to pay more interest because of its long repayment period. This, however, is a risk that most are willing to take.
The Winning Edge of a 15-Year Loan
There are also cases where a 15-year fixed-rate loan makes more financial sense than a 30-year mortgage. If you have enough money to afford larger loan payments, you may want to do so to avoid paying an interest rate that stretches for 30 years. It’s also good to know that shorter-term mortgages are less risky for lenders, so they usually come with a lower interest rate than a 30-year loan.
There’s no one-size-fits-all loan option, so it’s still best to do your research and talk to a reliable lender. Familiarize yourself with the different types of mortgages and learn their pros and cons, so you can make an informed decision. If you think a certain loan makes more sense for you but having second thoughts, talk to a lender about it.