Buying a home can be one of the most exciting experiences of your life. At the same time, committing to a 30-year mortgage can seem like one of the most terrifying things ever.
However, don’t let that mortgage scare you from buying a home. There are many things you can do to make it a lot less stressful. If you can, get a 30-year mortgage that’s fixed, and here’s why:
A lot of the mortgages that got people in trouble 10 to 15 years ago when the market melted down had variable interest rates. They had acceleration clauses, so we saw folks starting off at a 2% mortgage only to reach a 10% mortgage just three years later—their payments nearly tripled, and they were no longer able to own their homes.
Even when I purchase a home for myself, I make sure it’s with a fixed-rate mortgage because that way I know I’m not going to have any surprises.
There’s also a 15-year fixed-rate mortgage, allowing you to pay down on your house quicker. Be aware that this type of mortgage will come with higher monthly payments but slightly lower interest rates.
“A lot of the mortgages that got people in trouble 10 to 15 years ago when the market melted down had variable interest rates.”
The next step to reducing stress on your mortgage is to try to put as much money down on the house as you possibly can. Yes, there are mortgages out there that allow you to get into a home with 3.5% down or even no money down, but remember: The more money you put down, the less there will be to pay off down the road.
I recommend, if possible, getting a mortgage with 20% or more down. This way, you’ll have the peace of mind knowing your monthly payments from there on out will be manageable. Furthermore, should some catastrophic event occur and you need to sell the house, you’ll know that you have enough equity in the house to sell it and get out from under that large mortgage.
Right now, our interest rates have dropped below 4%, and some buyers are seeing rates below 3%! For reference, when I got into the business, they were closer to 10% and 12%. Though these rates have the potential to drop further, they’ve never been as low as they are now.
Here’s the last step to making sure your mortgage doesn’t scare you: Just get to it and pay it down. Keep taking a little bit from each paycheck and putting it toward the principal until you eventually own the house free and clear. That’s always a great place to arrive.