for Right At Home Daily
hat kind of loan should you choose? Consider the lower cost and higher risk of an adjustable rate mortgage over a 30-year fixed rate loan.
According to the mortgage industry, the average homeowner refinances his loan or sells his home within 5 years. If you're going to move or refinance your home within 5 years, choosing a 30-year mortgage doesn't make any sense. You're paying for stability you'll never need.
Instead, consider a 5-year or 7-year adjustable rate mortgage. The interest rate is fixed for the first 5 or 7 years, so the loan gives you some of the same stability of a 30-year fixed rate mortgage. But you may save anywhere from .50 to .75 percent over the rate of a 30-year fixed rate mortgage.
On a $100,000 loan, that savings translates into $50 per month, or $600 per year.
Ilyce Glink is the bestselling author of 100 Questions Every First Time Home Buyer Should Ask, and is the Managing Editor of Right at Home Daily.