Understanding which mortgage product is right for you will start with knowing what your goals are.  Someone that wants to raise their family, build equity, and grow old in their home has completely different goals then someone who is moving around and needs a home for just a few years. 

What you have to do is ask yourself “What are my goals?”

What are your goals?

Do you plan on moving or refinancing in the next 3-7 years?

Do you plan on living in your home for at least 8 years?

Does your income vary?

Do you want to buy and sell the property in less then 2 years?

Do you plan on Moving or refinancing in the next 3-7 years?

• Hybrid Arms (Adjustable rate Mortgage) 

If you are planning on making a move, or you’re planning to refinance in the next 3 to 7 years then 3, 5, and 7 year adjustable rate mortgages might be the best loan for you.  These loans are fixed for a longer period of time then traditional adjustable mortgages.   For the first couple of years (3, 5, and 7) the rate will be fixed principle and interest after that it will adjust to a traditional adjustable rate mortgage that fluctuates based on market conditions.

Do you plan on living in your home for at least 8 years?

• 30 year fixed mortgage

The traditional fixed rate mortgage is great if you plan on staying in your home for at least 8 years less then that adjustable rate mortgages are traditionally going to be a cheaper choice.  Fixed rate mortgages are harder to qualify for and if you’re a first time home buyer and aren’t sure how long your going to stay in your home this may not be the best choice for you. 

• 15 year fixed rate mortgage

Cutting your time in half that’s the beauty of a 15 year mortgage actually the true beauty is the fact that the loan is fully amortized in 15 years instead of 30. 
Here is an example:  $400,000 loan at 7%   amortized for 30 years would be  $958,035.59 paid over the life of the loan. 

The same amount amortized at 7% for 15 years would be $647,156.36.

$310,879.23 you would save over the life of your loan compared to a 30 year fixed.  

This loan would also have a lower interest rate then a 30 year fixed , if your main goal is to own your house outright and you don’t mind the higher monthly payments each month this maybe your best option. 

Does your income vary?

• Option Arm

Most people that get this loan aren’t fully aware of what they just received this loan can be your best friend or your worst enemy. To start off I’ll go over the negative aspect of this loan which is called negative amortization, this is where your loan amount goes up.  Why would this happen? This is how it works a option arm offers a minimum monthly payment that is set below current market interest rates, since this minimum payment is below current interest the extra interest that is not paid goes back on top of the loan amount, over a few years this can turn you loan upside down and you will owe more then your home is worth. What’s the good part? Simple put everything else; if your income fluctuates then you may want to consider an options arm, this is one of the newest loan programs but it can be very powerful unlike traditional mortgages that keep you at the same payment each month this loan offers 4 different choices each month.  The idea is to pay your full principal and interest payment each month but if your income fluctuates then you can pay the minimum monthly payment or interest only payment. 

Do you want to buy and sell the property?

• Option Arm

The option arm is the perfect solution for someone who wants to invest their money in property and then sell it for a profit. If you’re not planning on living in your home for more then two years this would be your best option.