Contrary to the belief of many Dallas borrowers, there are several different choices to make when it comes to getting a mortgage. Perhaps the emotion and excitement involved when purchasing a home causes people to automatically choose the first 30-year fixed rate mortgage they get offered. However, with some forethought, planning, and careful decision-making, you can save a good amount of money on your Dallas mortgage in both the near term and long term.
Some Things to Consider Before Looking at Your Options
Deciding which mortgage option is best for you before analyzing your financial circumstances would be like going into a buffet before you figure out how hungry you are or what is best for your diet. You have to make an honest assessment of your situation. To do this, it may help to consider what taking different mortgage options says about your financial circumstances. For example, a fixed rate 30-year mortgage essentially says, "I will be making pretty much the same amount of money for the next 30 years, and I donít mind taking that much time to pay off my mortgage." However, is this truly the case? Perhaps you believe you will be making more within a few years. If so, the 30-year option may still be a good idea, but it would help if you committed to paying more towards the principle once your income increases. Of course, this is just one example, and if you live in the Dallas area, there are tons of other instances where your personal situation may play a decisive role in the decision. Here are some questions to ask yourself.
1. How soon do I want to own my home outright? If you want to pay off your home quicker, you may be able to save on your interest rate by getting a 15-year mortgage. You will be paying more each month, but your equity will climb much quicker as well.
2. How long do I plan on keeping my home?
If you think you are likely going to sell your Dallas home within a few years, you can choose to still get a 30-year mortgage and pocket the money you save each month towards the purchase of your next home. However, you could also chip away at the principle faster by choosing a 15-year mortgage. That way, you can sell your home quicker because you will owe less and wonít have to ask as much in order to prevent taking a loss.
3. Do I want to give my home to my children or someone else?
If you are getting older, you may want to consider how much you will be giving your children if you decide to either move into a Dallas area retirement home or you pass away. If giving your children or another heir a home with a good amount of equity is a priority for you, you may want to consider getting a 15-year mortgage. This makes it all the more likely that your heirs inherit only value and not debt.
4. What is my retirement timeline, and what will my post-retirement income be?
As you purchase your Dallas home, if you are within 30 years of retirement, you have the chance to limit the amount of stress you will be feeling by choosing a repayment plan that eliminates your mortgage before you retire. This can be a luxury or it can be a necessity, particularly if your retirement income is going to be significantly less than what it is now.
Regardless of your final decision, getting a mortgage should be seen as a financial opportunity. This is your chance to not only get a beautiful home but to empower yourself financially for years to come.