Fixed Rate Mortgage

Jon Shibley, President & CEO, Lenox Financial

Stability in a Low Rate Environment

Fixed rate mortgages are the safest mortgages possible. I really like them in a low rate environment because a fixed rate gives you a lot of stability. It doesn’t matter if the rates go to the moon, if you are locked in to a 30-year mortgage, you know that the payments will be the same and at the end of the term, the loan will be paid off.

With 15-year mortgages, the payment is higher than a 30-year loan but the rate is lower.

If you are not going to incur a lifestyle change by being on a 15-year loan, you absolutely need to be on one because it will save you hundreds of thousands of dollars in interest over the life of the loan in most cases, especially if you have a higher mortgage.

Don’t mistake having a higher payment with spending more money—you are at that point, and you could go back and retrieve that equity at any particular time with a home equity line of credit or possibly by refinancing your mortgage.

Benefits of No Closing Cost

If you are using a no closing cost mortgage, you can move in and out of these products with out having to worry about it. If your income is capped, a 15-year mortgage is one of the few ways you can build wealth.

Payment Strategies

In the case of a 30-year loan, you will pay a lot more interest. It gives you a really good tax write off. If you can, set up a hedge, take the lower payment by doing a 30-year mortgage, take the additional tax write off, and then be disciplined enough to pay ahead on it.

You may want to take a 30-year mortgage and then just have a 15-year amortization on it, which will let you pay ahead on it as if it were a 15-year term but you are not forced to make the payments.

If you are not going to incur a lifestyle change by having a higher payment, you absolutely have to be on a fifteen-year mortgage.

A 15-year mortgage is fixed for 180 payments; the rate can never change. A 30-year mortgage is fixed for 360 payments. The rate will never change.

No matter if you do a 30-year fixed mortgage or a 15-year fixed mortgage, a no closing cost loan is the way to go. The market fluctuations are rampant and there is no reason to invest thousands of dollars in closing cost in these mortgages.

We have refinanced some customers five times who never spent a nickel yet lowered their rate every single time.

Take Advantage Of All The Market Fluctuations

If you are going to go with a fixed rate, lock it in, set up a hedge, and subscribe to the mortgage management system. What that means is that we are going to watch the market, and as rates get better down the road, we will do it again; and as rates get better down the road, we will do it again; and so on. When you are not investing thousands of dollars, it changes the whole game. Now, for the first time in history, you are in a position to sit back, watch the market and take advantage of all the market fluctuations that are going to benefit you.

Once you have set up an umbrella and have a fixed rate, your payment is never going to change. Once you are involved in the system, you are going to get all the benefits of an improving market, and you are not going to have to incur the detriment that you would have to go through if you were in an adjustable rate mortgage as opposed to one of these fixed rate products.