You just should. Yes, take a look at the other mortgages (15 year, ARM, etc.) so you know whats available.
In the end, choosing a 30 year fixed rate mortgage over the others comes down to two things. Flexibility and Security.
Most people consider owning a home a life long investment. We all like to think we will stay in that home until we die but this is hardly the case. Many people move within 5-10 years as families grow, job changes, etc.
With a 30 year fixed rate mortgage your payment will never change until the day it is paid off. What this means is as your life changes your monthly housing costs will not. Its nice to know your mortgage payment is never going to change.
Stay The Course – Keep making monthly payments as normal for as long as you live there.
Pay It Off Faster – Why refinance into a 15 year loan when you can make larger payments? When you refinance into a 15 year mortgage payment your required monthly payment goes up forcing you to pay more. Pay more to your 30 year mortgage when you can and scale back when you can’t.
Can’t Sell? – Moving and can’t sell your home? What about renting your house? With the 30 year fixed rate mortgage you’ll probably be able to rent your house for more than what your payment is.
It is true that the 30 year fixed rate mortgage typically has an interest rate .5% to 1% more than a 15 year mortgage. While interest rates are important you need to understand that interest rates are what they are. Of course you should want to get the lowest rate possible when getting a new mortgage but its the payment you should consider first.
As an example.
$150,000 loan at 5%:
30 year payment = $805.23
15 year payment = $1186.19
If you want to pay the house off in 15 years than put an extra $381 on your 30 year payment. Its that simple.
And with you having the lowest payment possible with a 30 year mortgage you have now freed up money to max out your 401k, not go into debt, pay for day care, and every other financial reason.
You put yourself in control of your financial position with a 30 year fixed rate mortgage versus other mortgages. The only reason you would refinance out of your 30 year mortgage is if interest rates go down.
Make sure if you do refinance that the interest savings cover the closing costs of refinancing. Typically if you can save .5% on another 30 year fixed rate mortgage it will make sense.
I’d suggest not refinancing or buying a house with an adjustable rate mortgage (ARM) unless you are absolutely 100% sure you will be selling the house before the interest rate adjusts. Yes, it could go down but it could also go up. Do you want to be paying closing costs again to refinance?
Do yourself a favor and take the 30 year fixed rate mortgage. You will be doing yourself a long term favor with your finances when you have one.