You're never going to spend more than a few years in this house. Maybe
your spouse has a thing about moving. Maybe you know you'll eventually need space to work
from home. Maybe you're planning on high-tailing it to Montana in a few years. This isn't
where you'll grow old.
What You Want: You're a candidate for an adjustable mortgage or maybe a "delayed
adjustable." Also known as 3-1s, 5-1s and 7-1s, these loans are fixed for their first three,
five or seven years, then convert to a one-year adjustable. If you are going to spend less
than three years, take a look at one-year adjustables. You'll lose the stability of a
fixed-rate loan, but if you're only going to stick around for a few years, why not get all
the savings you can? Another thing: You can buy a "conversion option." For about $250 and a
slight premium on the rate, many lenders will allow you to convert your delayed adjustable
to a fixed rate, as long as you do so before the loan starts adjusting. This is good
protection in case you stay put longer than you anticipated.
Where to Shop: Midsize banks and thrifts -- which typically hold onto the loans they
write -- are always the most aggressive players in the adjustable market. A few large banks
will be competitive, too. Though they've always made most of their money outside the
mortgage business, some such as Chase and Ohio-based Charter One Bank may be eager to sell
you adjustable loans. Also, keep in mind that you may be able to get a better rate with them
if you have other business, such as an in-house checking account, that you can bring to
their table.