I’ve been obsessing over whether to buy or rent an apartment over the last several months. But after renting for eight years, my wife and I finally decided that buying an apartment in New York City made sense for us.
When we started the process, I assumed that if Jenn and I did buy, we would just get a 30-year fixed rate mortgage. That’s the loan type I’d always heard about — the one whose rates are discussed in the news media, the one mentioned by friends who had bought.
Though the Fed recently said it was going to hold rates low “for some time,”there’s really nowhere for rates to go but up in the future. So it seemed natural to want to lock in today’s attractive rates for a long period of time. On top of that, the alternative — adjustable rate mortgages — have gotten a lot of negative pressfor their role in the recent financial crisis. Their low initial interest rates lured subprime borrowers into taking out mortgages that they later found themselves unable to either refinance or repay.
After taking a long look at all of the factors and our own situation, we decided to go with a 7-year adjustable rate mortgage. That’s right, we chose the much-maligned ARM — and here’s why.
It’s About Time
When it comes to mortgages, the time component is the most important part of the equation. If you’re buying a house that you’re planning to stay in for the rest of your life, then a 30-year fixed rate loan probably makes sense.