By Amy Crane
bankrate.com
Although many people believe they'll remain in one house for years, the reality is that most won't. American adults average a move every five years, according to federal housing data. Today's uncertain economy means that many workers may find themselves moving to keep their job or get a new one.
Whether or not you see yourself as a serial relocator, these days more and more people qualify. By discarding that 30-year mortgage mentality and adopting a hardheaded, practical approach to moving and homeownership, you're less likely to lose your shirt when it's time to pull up stakes and move again.
The sheer number and variety of mortgage options means that you stand a better chance of finding a mortgage that meets your needs even if you stay in a house for a short time. If you're on a short-term assignment, think hard about whether you should buy at all. Renting may be your best bet.
"If you're going to be living somewhere a year or two, it makes sense to rent," says Betty Crandall, president of Christie's Real Estate, Great Lakes Region in Erie, Pa. "Or, if you plan to be somewhere longer and have bad credit, rent while you save for a house and work to fix your credit problems."
Despite the fact that interest rates may rise in the coming months and years, adjustable rate mortgages, or ARMs, still make sense for serial relocators. Vijay Lala, senior vice president of Countrywide Home Loans, recommends one-year or hybrid ARMs that are interest-only, which gives homebuyers the maximum amount of flexibility.
"For someone who will be in a house for no more than three years, an ARM using a LIBOR index means a very low payment," he says.
LIBOR stands for London Interbank Offered Rate, a spot rate that can change quickly. For someone who is going to be in a house for three to five years or longer, a three- or five-year hybrid ARM with an interest-only term provides a low rate plus some protection against rising interest rates.
"A three or five-year ARM gives you the chance to outlast the mortgage cycle, which lasts about three to five years," Lala says. "We see dips in rates during this time period and that gives buyers a chance to refinance to a lower rate."
Hybrid ARMs leave the first years of a mortgage at an initial fixed rate, which then adjusts annually. While interest-only terms allow buyers to qualify for a mortgage more easily, if you opt not to make any equity payments, you won't build up equity.
Longer-term fixed mortgages offer buyers more security, but aren't always the best deal for frequent movers. Brendan Nordgren, a teacher in Athens, Ga., discovered that longer-term mortgages carry a sting for serial relocators.
"We've had 15-year mortgages a couple of times that have left us being cash poor and with not a lot of equity when we moved because we hadn't stayed in the house that long," she says.
If you decide to buy, your choice of a home can enhance or doom a quick resale should you have to unload it in a hurry. Experts advise playing into regional tastes in terms of a home's layout and choosing a house in an established neighborhood. These two factors make a house easier to sell.
Crandall recommends hiring a real estate agent who knows which areas are the most desirable where houses sell quickly. "Look at established neighborhoods where people want to live," she says. "When you may move fairly soon, it's location, location, location because you want a house that is sellable."
Donald Fletcher, an ophthalmologist at the University of Alabama at Birmingham Center for Low Vision Rehabilitation, has moved frequently during the course of his medical career. "Usually by the time I'm ready to move I have just about enough equity built up to pay for the front doorknob," he says.
This is his second stint in Birmingham. He lived there for two years in the early 1990s, and had a hard time selling his house, which was on the market for more than a year. "Then you find yourself making payments on two houses and that's a tough situation," he says.
