Should You Get a 15 Year Fixed or an Adjustable Rate Mortgage over a 30 Year Fixed?

I am hearing of so many people doing this and for most it is not the best move.  Many Baby Boomers are taking out reverse mortgages because they own their homes free and clear but didn’t understanding compound interest and putting your money away early on.  Paying off your mortgage is easy but building your net worth isn’t.

The majority of homebuyers or homeowners do not much money in reserves for a rainy day or much put away in retirement and because of that should be putting less money down and going with a 30 year fixed.  Susie Orman and Dave Ramsey advise everyone to be debt free and a homeless person is debt free but has no wealth.  You need to be using your mortgage as a financial tool to increase your net worth.  I have a great illustration of this so email me at [email protected] for free a copy of it.

As for an Adjustable Rate Mortgage (ARM), for most people it is not the right option.  Not only is there so much uncertainty in the economy right now there will always be uncertainty in your life as you could lose your job tomorrow.  Many are being offered a 7 year ARM and they are going with it because they will sell the property within that time period.  A whole heck of a lot can happen in 7 years.  Plus with rates at historic lows why would you want to take that gamble and you might want to rent your property once you move out to create cashflow for yourself.  Even if I didn’t know anything about an ARM what I can tell you is that if banks are offering rates that are so much lower than a fixed rate they must know something I don’t.

Everyone’s situation is different so make sure to contact someone like myself that will go over this and illustrate all of your options so you can make the right decision for you and your family.