Getting the Right Mortgage in a Confusing Market

Well, Freddie Mac says mortgages are up; the Mortgage Bankers Association says they are down. And to all appearances, no one is quite sure what is going on in the housing or mortgage sector.

This situation makes it very confusing for consumers. Should you lock in? Should you "go long"? Should you "go short"?

In some ways, it might be a good thing that the "advice" is so contradictory. It means that we, as consumers, should be paying attention to our own situations, and planning for our own "comfort zone". Going for a long-term mortgage is perfect for people who want to keep payments low and want to lock them in for the longest period possible. There is a lot of stability in that, and it makes it easy to plan. Going for a shorter term mortgage works for people who can tolerate more risk, and aren't worried about changes in their job, their family, or the interest rate. (As my wife and I are in the process of remembering, the addition of a new family member is likely going to drive up our costs of many things, from food to clothing to holidays.) You can balance a shorter term on your mortgage with a longer amortization period. That gives you lower payments, but the option to renegotiate more often.

Do you have a job where you'll have an "irregular" income, including bonuses or commissions, that might allow you to slap a good amount of extra cash on your mortgage? Get something that is either "open" or allows you the most flexibility in making additional payments. You may pay more interest, but you'll save in the long run if you make those lump sum payments. You'll likely want to keep your payments low for those times when commission or bonuses don't happen; so go long in amortization and even term, but go for "features" on your mortgage.

It's all about you and your family and what "fits". Even when all the analysts line up in a row and say, "Do THIS!", it's still about you and your family. It's just more obvious that the decision belongs to you when the analysts can't agree on what to say.

Michael

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