If you already have a home mortgage, this is an ideal time to refinance, with interest rates near record lows. If you’re not a homeowner, lower mortgage rates make buying a home more affordable.
Either way, you’ll have many mortgage options to choose among. A 30-year loan has the smallest monthly payment so you may be able to qualify to buy a more expensive home. Many borrowers, though, choose 10-, 15-, or 20-year mortgages instead. The rates are a bit lower and you might save tens of thousands of dollars in interest payments over the life of the loan.
Yet another alternative is an adjustable-rate mortgage (ARM). On a “5/1 ARM,” for example, the initial rate changes after five years, then is adjusted annually. Going from a 30-year loan to a 5/1 ARM might cut your rate by around 0.5%, so this is a good choice if you don’t expect to be in the home longer than five years.
