When long term rates (i.e. 30 year mortgages) are below 6%, it kind of makes the choice obvious — the 30 year fixed rate makes the most sense in most cases. But as rates begin to creep into the 6’s and above, the appeal of hybrid and adjustable mortgages will increase.
Why? Because very few of us keep our housing situation consistent for 30 years and will never fully experience the benefit of the rate we have paid to have.
When you choose a 30 year mortgage, you are buying the privilege of the rate for 30 years. But what if you are only going to be there for 5 years? Or 10? Or even 15? Sometimes, choosing a 7 year fixed that turns into a 1 year adjustable that is 2 full rate points lower than the 30 year fixed rate makes a lot of financial sense.
As rates will likely inch higher over the next several years, don’t blindly choose a 30 year mortgage just because those before you did. Think about your overall plan for housing and choose accordingly.