Mortgage Strategies For Buying A Home

Key Takeaways

• If you plan to sell or move within 15 years, consider a 7/1 or 10/1 ARM instead of a 30-year fixed—you'll lock in an even lower rate for your actual holding period and avoid unnecessary long-term rate guarantees.
• Before refinancing, compare the interest rate savings over your remaining time in the home against total closing costs; if closing costs are waived or minimal, refinancing for even a 0.25% rate reduction is usually worth it.
• Calculate whether refinancing savings exceed closing costs by multiplying your loan amount by the rate difference and comparing to refi costs—for example, a 0.25% savings on a $400,000 loan must exceed your refinancing expenses.
• Budget for unexpected homeownership costs (typically 10% of home price annually) and life uncertainties like family changes and career moves when deciding between a shorter-term ARM and a 30-year fixed mortgage.
• Today's historically low mortgage rates mean more of your monthly payment goes toward building home equity (principal) rather than interest, giving buyers significantly more purchasing power than in past decades when rates were 13-15%.