The Mortgage for the Young Married Couple
As a young married couple, you’ve got a few things on your plate. You’re either at the beginning of your career or still trying to choose one; either way you’re not making as much as you would like, and money is tight. You’re probably thinking about when to start having kids (or have already started), and worrying about your aging parents at the same time as worrying about preparing financially for when you are that age. Believe it or not, your choice of housing can affect all of the above things in either a positive or a negative way. In this article, we’ll talk about the decisions you can make that have a greater chance of positively affecting the concerns you’re facing.
Choose to Buy, not Rent
The best thing you can do for your housing situation is to choose to buy and not to rent. If you rent, you are throwing away every dime you pay every month. If you buy, you are only throwing away as much as you’re paying in interest, taxes, and insurance. The portion of your monthly payment that goes toward principal is an investment, and not only will you get that money back when you sell, you’ll likely get even more as the value of real estate increases. An essential component of choosing to buy, however, is that you also choose to stay in the same house for at least five years. Sometimes career opportunities and promotions make this impossible, but avoiding moving or refinancing as much as possible saves you a ton of money. If you’re a veteran, you should definitely use your VA loan benefits. Insist on it, because a VA loan will do much better for you than a conventional loan.
Look Into the VA Hybrid ARM
As mentioned above, for a young married couple money is almost always tight. The nice thing, though, is that you have a reasonable assurance that your income will go up in the coming years (after all, when you’re at the bottom of the ladder, the only place to go is up, right?). With a VA hybrid ARM, you can get an insanely low starting rate (we’re talking around 2.25%) for the first 3 years. Not only does that bring your monthly payment down quite a bit, but it also shifts the balance of your payment in your favor. In most fixed-rate loans, you start out paying a lot more interest than principal each month, and the balance slowly shifts over the course of the next 15 years. With a VA Hybrid ARM, you’ll often start the payments with the balance in your favor because of how low the starting interest rate is.
Preparing for the Future
There are three reasons why the VA Hybrid ARM helps you prepare for the future. First, your monthly payment is lower, which helps you either put more money away in savings or to take care of your family. Second, more of your monthly payment goes towards principal and less to interest, which means you’re flushing less money down the toilet every month and converting more of one asset (cash) into another (house). This lets you spend less and invest more of your money. The third reason is the Hybrid ARM has a 5% lifetime cap on how high it can adjust, and an annual adjustment cap of 1%. So, if you started at 2.25% for three years, the highest the interest rate could ever go is 7.25%, and it would take a minimum of 8 years to get there. Considering how much extra principal you can pay off with such a low-interest rate in that time-frame, your monthly payment would barely rise or perhaps even fall even if your interest rate rose the full 1% every year and maxed out as soon as it could.
It All Works Out in Your Favor
You’ve got enough to worry about: your jobs, your kids, your parents. If you’re like most people, those worries often manifest themselves in the form of cash flow. Your job isn’t bringing in enough money; it costs upwards of $10k to have a child; your parents need assistance. Buying will serve you better than renting, especially in the long-term because you will be building an investment instead of throwing money away every month. Using a VA hybrid ARM to buy will serve you better than other options because it starts you out so low and makes any increases very manageable. Check out your VA loan options today.