Fixed rate mortgages are the safest mortgages available in today’s marketplace. I really like them in a low rate environment, because a fixed rate offers you a lot of stability. It doesn’t matter if the rates go to the moon! If you are locked into a 30-year mortgage, you know that the payments will be the same until the loan is paid off.
With 15-year mortgages, the payment is higher than a 30-year loan, but the rate is lower. If you are not going to incur a lifestyle change with a 15-year loan, you absolutely need to have one! In most cases the shorter term and lower rate will save you hundreds of thousands of dollars in interest over the life of the loan, especially if you have a large mortgage.
Don’t mistake having a higher payment with spending more money—in a 15-year mortgage most of that additional money goes into your own pocket in the form of equity. You can go back and retrieve that equity at any particular time with a home equity line of credit or possibly by refinancing your mortgage.
If you are using a no closing costs mortgage, you can move in and out of these products at will. You’re not “stuck” with a your mortgage because you paid thousands of dollars for it. If your income is capped, a 15-year mortgage is one of the few ways you can build wealth.
In the case of a 30-year loan, your interest will be greater over the life of the loan as I mentioned above. It gives you a really good tax write off. If you can, set up a hedge. Take the lower payment by doing a 30-year mortgage, take the additional tax write off, and then be disciplined and pay it as if you had a 15-year loan.
A 15-year mortgage is fixed for 180 payments; the rate can never change. A 30-year mortgage is fixed for 360 payments; the rate will never change.
No matter if you do a 30-year fixed mortgage or a 15-year fixed mortgage, a no closing costs loan is the way to go. The market fluctuations are rampant and there is no reason to invest thousands of dollars in closing costs in a mortgage that you might want to change down the road if rates improve or your financial situation changes.
We have refinanced some customers five times who never spent a nickel, yet lowered their rate every single time.
If you are going with a fixed rate, lock it in, set up a hedge, and subscribe to the mortgage management system. What that means is that we are going to watch the market, and as rates get better down the road, we will do it again; when rates improve further, we will refinance your mortgage again, and so on. When you are not investing thousands of dollars in costs the whole game is changed. Now for the first time in history, you are in a position to sit back, watch the market and take advantage of all the market fluctuations that are going to benefit you.
Once you have set up an umbrella and have a fixed rate, your payment is never going to change. Once you are involved in our mortgage management system, you are able to take full advantage of the benefits of an improving market.