I read an excellent article in Realty Times, by columnist Broderick Perkins. His point is at different times in your life, a particular mortgage product may be best for you.

Here are a few excerpts from that article that are appropriate whether you are a first time buyer in New Jersey, an empty nester couple looking to sell the large family home on the Main Line and move into Center City, or the 2nd home buyer looking at the Jersey Shore.

First-Time Buyers
Young first time buyers might consider "two-step" or hybrid mortgage. There are initially cheaper and may be easier to qualify for due to the lower monthly payment compared to the 30 year fixed. Although beware, if interest rates are higher after the lock in period, you better hope you are making more money or your monthly payments will rise!

As Perkins notes: "....adjustable-rate mortgages (ARMs) come with mortgage rates that are effectively fixed for the first step of three, five, seven or ten years and then become 1-year ARMs with rates that adjust each year for the term of the loan. Hybrid ARMs are a good fit because statistics reveal first-timers typically move after five-to-seven years when growing incomes permit the move and growing families dictate the need for a larger home."

Move-Up Buyers
Perkins notes in this category, "Some move-up buyers who know they will move-up again, likewise should consider hybrid loans for the same reasons they work for first-timers. In the current low interest rate market, however, move-up buyers may do well to opt for a plain vanilla, conventional or jumbo 30-year fixed-rate mortgage with 20 percent down."

"In terms of long-term financing, look for loans with at least 20 percent down to avoid private mortgage insurance. A plain 30-year mortgage with the right to prepay in whole or in part at any time and without penalty can be especially attractive because if incomes rise, you can increase your monthly payments to shorten the loan term or reduce interest costs," said a noted expert Mr. Miller quoted by Perkins.

Empty-Nesters
Perkins poses the question: Moving down to a smaller home often raises the question, "Do your really need a mortgage?"

"Crunch the numbers to see if you are better off getting a mortgage or going free and clear. Ironically, empty nesters are often in their highest earning years and this may be your last chance to use the mortgage interest and property tax deductions to shelter your income," says San Francisco broker Ray Brown, who also co-authored Mortgages for Dummies,
If you do need a mortgage, says Brown, a mortgage with a shorter term, say 15 years, is a good choice. Along with the lower rates you have the option of making larger payments or paying the mortgage off early. On the other hand, the liberal capital gains tax law that allows couples to take tax-free profits of up to $500,000 on the sale of a home, could infuse you with enough cash to free you from the need for a mortgage-based tax shelter."