Mortgage Planning: What to Consider

Mortgage ratesChoosing a mortgage is no different than choosing a house to buy. These two related tasks share a lot. As you can't decide on the house because it's the cheapest option, you cannot choose your mortgage plan just because it has a lower monthly payment. You need to consider the following: 

Length of the Mortgage Plan 

No one wants to pay their mortgage in Sandy forever. A shorter duration means higher monthly payments, but if you choose a 30-year mortgage, the smaller monthly payments hide the fact that you are paying a higher price because of the interests. Consider what you want to do with the house when choosing a loan term: Are you planning to live in the house permanently, or do you plan to sell it eventually? That should help you decide.

Interest Rate 

You may either get an adjustable-rate mortgage or a fixed-rate mortgage. An adjustable-rate mortgage means the interest rate you pay depends on the market. When it comes to fixed-rate mortgages, however, the initial interest rate is what you would be paying throughout the loan term. There are also plans where you start with a fixed rate for a couple of years, but the rate changes for the remaining years in the term. 

Your Financial Capacity 

A mortgage is a long-term obligation. This means you need to consider your finances in the upcoming years. If you are looking forward to a salary increase, your choice of a house may consider those that can be a bit more than what you would pay given your current salary. If there is a big possibility that the household may lose some of its income, you might not want to consider a house that does not give you much leeway. 

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Home ownership is an important step for your family. Don't be burdened by monthly mortgage payments; decide on the mortgage plan wisely.