The Myth of the Fixed Rate 30-Year Mortgage:
Let me get to the point without forcing you to read a long introduction; “Most People Keep Their Homes for Six Years”. So why is it that most people look for a fixed rate 30-year mortgage?
While many of us would like to believe that the home we just purchased will be our home forever, in most cases that is not the reality. According to a recent Federal Reserve Bank study, the average age of the first time buyer is 33 years old. So on average, most people will purchase 4 homes in their lifetime. Actually, that number may be slightly higher when you factor in certain life changing events such as children, career changes, marriage, divorce, and aging.
Children are a wonderful blessing and nothing else can change your life so quickly and permanently. But you might come to a realization that the one bedroom one and a half bathroom starter home may not be enough once the pitter-patter of little feet echo down the hallways. Kids grow, needs change, teenage girls want their own room and bathroom. And for the sake of domestic tranquility, it may be time for a larger home. So much for that fixed rate 30-year mortgage.
Time goes by in your new home, and then that once-in-a-lifetime opportunity knocks. A career change or that promotion you were dreaming of finally comes however, with some strings attached, it’s out of town; time to move. So much for that fixed rate 30-year mortgage.
Certain things we can control, some others not so much. As recent history has shown us, the economy and job market can be a fickle thing. For some it was a tragic few years, for others it was a great opportunity. Some had to downsize their homes, and some had an opportunity to get a larger home at a low market price. So much for that fixed rate 30-year mortgage.
Sadly about 50% of marriages in the US fail within the first 11 years. Not a happy statistic, but nevertheless, it is what it is. So much for that fixed rate 30-year mortgage.
And as we grow older our needs change too. Children move out, our health changes and that flight of stairs to the second floor becomes daunting or impractical. So much for that fixed rate 30-year mortgage.
So, the facts of life don’t lie – scores of homeowners are on the move in just six short years, whether they hold 30-year fixed mortgages or whatever else. When it’s time to buy again, think for a moment if that 30-year fixed rate mortgage is the best choice, maybe that 5/1 AMR is a better deal.