Decide now how long you'll stay in this house


You have your mortgage lender on the line when you're confronted with that thorny question: How long will you stay in your home?

It's hardly an academic issue. Your answer to the question should figure prominently in your selection of a mortgage.

And picking the right type of home loan can cut your monthly mortgage payments by several hundred dollars, says Daniel Coffey, manager of Great Western Mortgage's Pikesville branch.

Too few think through their answer to the question of how long they'll stay in a home, Mr. Coffey says.

"People fool themselves into thinking they'll stay for 30 years just because that's what their parents did."

While the length of time the average American family is staying in a home in the 1990s is inching ahead of the average for the 1980s, they're still remaining for a considerably shorter period than did their parents or grandparents.

The economy may be something of a restraining factor against quick moves, but lifestyles and housing desires have changed dramatically from past generations.

"I don't know of anyone who stayed in one house for 30 years except my mom and dad," Mr. Coffey says.

It's not only changing lifestyles that argue against making blanket assumptions about how long you'll stay in a home when you're taking out a new mortgage or refinancing. The proliferation of unusual mortgages makes an analysis all the more important.

Once, a traditional fixed-rate, 30-year mortgage was just about the only choice open. Now, a mortgage borrower can chose from a variety of adjustable-rate mortgages as well as hybrid adjustable-fixed-rate mortgages.

The term of years before a loan must be paid off has also become a matter of choice.

A home purchaser who expects to remain in a property for just a few years can often do better with one of the newer mortgage products that's priced low at the beginning rather than a 30-year fixed-rate loan.

But the purchaser who genuinely believes this will be his final home purchase could do far better with a moderately priced 30-year mortgage.

Mortgage specialists offer these pointers:

* Get real about how long you'll stay in a home.

Rather than assuming that a 30-year fixed-rate loan is the right answer, analyze your particular situation, suggests David Berson, chief economist at the Federal National Mortgage Corp. (Fannie Mae).

Before you commit to a particular home loan or decide on refinancing, Mr. Berson says you should sit down and ask yourself a series of questions:

Are you working in an industry where job changes and transfers are common or can you expect to stay with the same company at the same location indefinitely?

Is the home you're planning to buy (or refinance) located in an area in a neighborhood that's improving or getting worse?

Would you expect to move soon due to declining test scores at neighborhood schools or deteriorating property values?

Is the commute from your office to the home becoming longer and more congested? How long would you be able to put up with the time or distance of the commute?

* Explore any plans you may have to start or expand a family, or expand the one you've started.

If you can only afford a two-bedroom condominiun now but anticipate having a second child within three to five years, factor your family plans into your judgment as to how long you'll remain in a property, counsels John Freeman Blake, a financial planner in Washington.

Many young couples, he says, automatically assume that a 30-year fixed-rate mortgage is their best bet based on tradition and their parents' preferences. But a couple certain it will move in the near future because of growing housing requirements could well do better with an adjustable-rate mortgage that's priced lower in the early years. That's because they're likely to move before the mortgage makes substantial upward adjustments.

* Think realistically about housing plans in a post-retirement period.

People entering their retirement years often deceive themselves about how long they will be able to stay in a home they are buying or already own, says Mr. Blake, the financial planner.

"A personal residence is not just an investment. It embodies the American dream. And some people feel they will hang on to it longer than they actually can," he observes.

Reduced income, during retirement, altered priorities or health limitations could easily impact the duration of your stay in a property. Those who face these issues squarely operate at an advantage when they're confronting a mortgage decision, Mr. Blake says.

* Face the facts about quick housing transitions in the 1990s.

During much of the last decade, it was possible to buy one property, quickly build up equity and then move to another, taking advantage of the profit you made on the first.

But appreciation is hardly the sure bet it once was and, in some communities, homes move slower than cold molasses, says Keith Gumbinger, an analyst with HSH Associates, a firm that tracks mortgage rates for consumers.

"The discretionary move is hard as a rock at this time," he says.

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