How to Evaluate a Mortgage Option When You Might Move in 3 to 7 Years

A mortgage can last for decades. Your plans for a particular home may not, though.

Maybe you expect a future job change, want to be closer to family someday, or just know your first home probably will not be your last. If moving again within, for example, 3 to 7 years is a realistic possibility, that timeline can help you evaluate your mortgage choices.

The mortgage you choose affects more than your monthly payment. It impacts upfront spending, how much of that cost you might recover before selling, and how exposed you are if your plans shift. If you already suspect this home might not be a forever home, that’s okay.

It just means you ought to carefully consider your mortgage options with that timeline in mind. Here are some factors to think about if you’re comparing mortgage options when moving in 5 years, or anywhere within that general 3-to-7-year window.

Why Your Expected Timeline Matters for Mortgage Options

When you take out a mortgage, you’re generally paying certain costs upfront (like closing costs and, in some cases, discount points), and receiving loan terms that pay off gradually over years. If you expect to stay in the home for two or three decades, those upfront costs have plenty of time to even out.

But if you expect to move in three to seven years, the math can look a bit different. A loan that might save you money over the long haul may not have enough time to deliver those savings before you sell in that scenario.

That’s why your expected timeline should be treated as its own input when comparing mortgage options, right alongside the interest rate and monthly payment. The number of years you realistically expect to keep the home can have a meaningful impact on which option ultimately makes sense for your situation.

Comparing Mortgage Options When You Might Move in 5 Years

When comparing how your interest rate works over time, you’re likely to encounter two common structures: fixed-rate and adjustable-rate mortgages. If you’re unsure how long you’ll stay in the home, each has different things to be aware of:

• Fixed-rate mortgage: A fixed-rate mortgage carries the same interest rate and payment for the entire term of the loan. It’s predictable, and it removes the risk of your rate changing. That certainty can sometimes come with a somewhat higher upfront rate compared to some adjustable options, depending on market conditions at the time.
• Adjustable-rate mortgage (ARM): An adjustable-rate mortgage (ARM) starts with one rate for an initial period, then the rate resets periodically after that, based on the loan’s terms. If your initial fixed period lines up with (or runs longer than) how long you actually plan to keep the home, you might not experience an adjustment at all.

This is the heart of the ARM vs fixed mortgage if moving soon question. An ARM with an initial period that comfortably covers your expected timeline might be something to consider. But if your plans change and you end up staying past that initial period, your payment could adjust, sometimes upward.

A fixed-rate loan doesn’t carry that particular risk, which is part of why it remains a popular choice, even for buyers who expect to move.  A mortgage banker can walk through both structures using your actual numbers, so you’re comparing real terms rather than general concepts.

How Mortgage Points and Break-Even Timing Factor In

Discount points, if your lender offers them, let you pay more at closing in exchange for a lower interest rate over the life of the loan. Whether that trade is worth it depends heavily on how long you keep the loan, which is where mortgage points break-even timing comes in.

Your break-even point is the point at which the money you’ve saved through a lower monthly payment equals what you paid upfront for the points. Before reaching that point, the cumulative monthly savings have not yet offset what you paid upfront. Afterward, those savings may begin to exceed the initial cost. A mortgage banker can help you calculate this timeline for any specific loan by comparing the upfront cost of the points against the monthly savings they produce.

If you expect to sell before you reach that break-even point, paying for points may end up costing more than it saves. If you’re fairly confident you’ll stay past it, points may lower what you pay over time.

What If You End Up Staying Longer Than Planned?

Plans change. The job that was supposed to relocate you in three years might not, or the family that was supposed to outgrow the house in five might settle in comfortably instead. Because plans can change, it’s important to account for a few possibilities in your process.

As you decide what loan makes sense for you, it can help to compare the total cost of each mortgage option under two scenarios:

1. Your expected timeline
2. A longer, more conservative one

If you’re leaning toward an ARM, understand exactly when the rate can first adjust and what its adjustment terms allow, so a longer stay doesn’t lead to an unwelcome surprise. If you’re leaning toward a fixed-rate loan or paying for points, understand how the numbers hold up if you do end up moving earlier than planned.

Running the numbers both ways gives you an option that may hold up reasonably well no matter which timeline plays out, rather than one that only works if everything goes exactly as expected.

Key Takeaways

• Your expected timeline in the home is a factor in choosing a mortgage, especially if you expect to move within three to seven years.
• A fixed-rate mortgage offers a consistent rate and payment for the full loan term, while an ARM offers an initial fixed period followed by periodic adjustments.
• Discount points only “pay off” after you reach the break-even point where monthly savings catch up to the upfront cost.
• Comparing costs under both your expected timeline and a longer, backup scenario helps you choose an option that holds up either way.
• A mortgage banker can run the specific numbers for your situation, including your break-even point and ARM adjustment terms, so you’re deciding with the actual figures.

Final Thoughts

Buying a home when you already know another move may be a few years away calls for a little more planning. But it doesn’t necessarily have to be if you work through your options carefully. In some cases, the key is finding a mortgage that fits the years you’re fairly confident about, while understanding what happens if your plans shift.

Bring your expected timeline into the conversation with your mortgage banker, along with your down payment plans and monthly budget, and ask them to walk through how each option performs across a few different scenarios.