Home Loan Decisions: Is the Rate Worth the Mortgage?

MortgageBuying property may be a first for you, or it may be your second or third time around the block. If you are the latter, you have probably learned a thing or two about how it works. Most of the time, your choice of lender and mortgage type has an impact on your purchase.

One of the most important decisions you have to make is the type of mortgage. You may not have any control on the mortgage rate in Utah, but you can use it to make a good decision on the type of loan you choose.

Here is a brief description of the two types of mortgages:

Fixed rate

As the term implies, the interest rate remains fixed for the life of the mortgage. If you choose a fixed rate mortgage for 30 years, you will be paying that interest rate for 30 years. The benefit of having a fixed rate is predictability — no matter what happens to the economy, you know what you will be paying 30 years from now.

The downside is when the rate plunges. On the other hand, if the rate skyrockets, there will be no major changes. Currently, mortgage rates in Utah are slightly lower than the national average at 3.8% for a 30-year fixed mortgage, and 2.98% for a 15-year fixed mortgage. If you have a steady income and can afford the monthly payments, a 15-year mortgage is a good choice for you.

Adjustable rate

If you are feeling more adventurous, you can consider an adjustable rate mortgage (ARM). Your interest rate changes from year to year, depending on the principal mortgage rate. It is a risk that most people do not want to take, though.

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A more popular option is the hybrid ARM, where your lender fixes your rate for five or more years, and adjusts it yearly after the set timeline. There is still a risk, but not as much as a pure ARM.

Both mortgage types have their pros and cons, and what you choose ultimately depends on you. It is best to consult with a reliable and experienced mortgage broker to help you decide.