January 22nd, 2015 | Home Buying Tips
Getting ready to buy a home? Now is the time to be thinking about which type of loan term best fits your needs.
Most buyers take out a 30 year fixed rate Utah home loan. In fact, more than 80 percent of buyers select this option because of the low monthly payment.
The other main options are 10 year and 15 year fixed rate loans. The big downside with these shorter-term options is the significantly higher monthly payment. With a 15 year home loan, for example, you can expect to have a 28 to 30 percent higher monthly payment than with a 30 year. And, you’re locked into paying that higher payment.
The main advantage of a shorter-term mortgage is the earlier payoff and substantial savings. You’ll pay your home off more quickly and pay tens of thousands – in some cases hundreds of thousands – less over the life of the loan.
There’s always the adjustable-rate option. Today’s ARMs are often based on a 30 year repayment schedule, with a fixed rate period of five, seven or 10 years. After that time period, the rate adjusts. How high the rate can increase depends on the individual loan. ARMs are a way to get the lowest possible mortgage rate – their initial rates are usually lower than a 30 year mortgage – but they come with a significant degree of uncertainty. That’s why with rates so low on fixed-rate loans, many home buyers are deciding that ARMs aren’t worth the risk.
Have some questions about which type of Utah mortgage is right for you? Give us a call, your Utah mortgage broker, we’d be glad to help you!