Is Designing Your Own Mortgage an Attractive Idea?

Have you ever wanted to have a mortgage that didn't fit the standard 15 or 30 year terms that seem to be the only options available to you? While it’s always possible to sign up for a 15 or 30 year mortgage and prepay it sooner on your own terms, few borrowers ever follow through with this idea and they often spread out their payments to last throughout the agreed terms.

But some lenders are offering more than these two standard options to accommodate the growing desire for designing your own mortgage. Quicken Loans has pioneered the idea by creating a product that is based on that idea. The YOURgage allows borrowers to choose repayment options that range from 8 to 30 years. As a result, you can plan your mortgage repayments to end at a certain time of your life.

Did you ever think about getting your mortgage paid off during the same year that your kids go off to college? That way you can apply your money from your mortgage payments to college tuition. Or you can arrange for your mortgage term to end along with some other life event.

According to recent numbers, more than 14 percent of homeowners that refinanced their homes in June of this year chose a mortgage term that was something other than the standard 15 or 30 year fixed rate. That’s more than a 100 percent increase compared to the same time period last year. Many of the refinancers in that 14 percent demographic chose 20-year fixed rate mortgage loans, which is the third most popular term.

Before you decide if you should design your own mortgage, consider the following:

• Your Interest Rate – When designing your mortgage loan, you may not be saving any money by refinancing. For instance, if you currently have a 15 year fixed rate loan and you want to change to a 12 year fixed rate loan, your interest rate is likely to stay the same. This will cost you money with closing costs and other fees so you’re almost better off financially to continue paying on your 15 year loan and just paying extra each month to pay it off earlier.
• The Economy – By keeping your longer term mortgage, you are giving yourself flexibility in case a financial emergency arises. The longer mortgage term means you’ll be paying more in the long run, but you also have more money to put into your pocket each month because the payments are lower.
• Making Sense – Are you the type of person that simply isn’t disciplined enough to pay extra on your mortgage payments each month unless you’re forced to? If so and you want your mortgage paid off by a certain time in your life, designing your own mortgage may be the ideal way to make that happen.

Does this sound like a good idea to you? If you could design your own mortgage, what events coming up in your life would you start planning for today?

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