The standard 30-year fixed rate home loan has been the “IT” home loan for many American borrowers since the 1950s. But why is this exactly? You will be paying off your mortgage for a longer time and a fixed interest and principal you will repay every month, meaning that it will not get higher ever.
However, for many prospective borrowers in today’s housing market, it is vital to know that this might not be the most suitable mortgage option out there. If the following scenario applies to you, the 30-year fixed rate mortgage might not make sense for you.
Scenario #1: You Do Not Have the Standard 20% Down Payment
In the majority of cases, a 30-year fixed rate home mortgage you can get from lenders such as Primary Residential Mortgage, Inc. would require a 20% down payment. Meaning, if you only have money for a 10% down payment, it might make more sense if you get an ARM or adjustable rate mortgage.
Or you could consider other mortgage options such as an FHA home loan, which allows you to make a 3.5% down payment.
Scenario #2: You Are Not Planning on Staying in Your Home for More Than One Year
If you are just going to move out your home in a year or so, what is the point of paying for it for 30 years right? To recover your investment, you would need to stay at least three to five years in the house and then sell it.
Scenario #3: You Are About to Go into Retirement
If you have decided that you are going to retire in a few years, a 30-year fixed rate home mortgage would not get in the way of your plans. Consider an ARM instead, most especially if you plan to sell the house in a couple of years and switch to renting in your precious golden years.
Put simply, there is really no one-size-fits-all home loan because you have to consider plenty of factors to determine which mortgage type is best for your needs. Essentially, while a 30-year fixed rate loan might be perfect for most borrowers, it does not necessarily mean that it would be perfect for you as well.