In later years, their income rises and they can afford higher monthly payments, so they may take advantage of a dip in mortgage rates to refinance to a shorter-term loan. Mortgage brokers can help you figure out which kind of mortgage you should get. There should be no upfront fee for this. Recommendations from friends can help point you to a broker who will suit your investing style. After you have been approved, you'll need to figure out points, the extra charges you pay the lender up front to reduce your interest rate or compensate for a low down payment.
Fewer points reduce closing costs.
But if you're going to stay in the house for more than five years, it's not a bad idea to pay extra points initially to get a lower interest rate. When shopping for the best deal on a mortgage, people often compare completely different figures. According to the Mortgage Bankers Association of America, many people concentrate on only the interest rates that mortgage lenders are offering, rather than looking at total cost, including points and fees. Charging a lower rate but adding more points can make a mortgage more expensive. Unless you think you'll benefit from the financial discipline, you might ask if you can set up the mortgage so you pay your own insurance and taxes without putting the money into escrow, which is essentially a convenience to the lender.