Mortgage Pros and Cons in the New Economy
The small decisions on how exactly you set up your mortgage seem to be changing, according to a CNN Money report. Should you pay up-front points to reduce your rate? Should you make more than the minimum down payment? And should you lock in your mortgage interest rate?
These questions used to have fairly standard answers, but these days things look a little different. This is what some of the experts are now saying:
- Up-front points: Now, it’s often worthwhile to do this with lower interest rates in the offing. In particular, if you are fairly sure you will keep this loan for some years - which is more common at times like this, because refinancing is less likely - then do the math and paying a point up-front will often pay for itself within a couple of years and then the money you save is all a bonus.
- Minimum down payments: Some home buyers have been burnt by making large down payments and then seeing their home equity (and their cash down payment) shrivel up. That means if you’re buying in a market that is still in decline (or could be), don’t make more than the minimum down payment to start with.
- Locking the mortgage rate: Surprisingly, many say that locking in now, even though rates are falling, is actually quite smart. Rates go up much more quickly than they go down and you’re likely to get caught out over the life of your loan.
This entry was posted on Sunday, March 15th, 2009 at 4:45 am and is filed under Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
