Changing circumstances? Change your mortgage -- page 2

Walters' main point is that borrowers should consider all their options and "match their mortgage to their lifestyle." If you choose a fixed-rate, 30-year mortgage, he believes, you should be able to explain why you got that loan and not a 5/1 adjustable. And you should think about these matters periodically and not just when you buy the house.

Chris Larsen, CEO of E-Loan, agrees that homeowners should re-evaluate their mortgages, but not just annually. "I might go a step further," he says. "You might want to evaluate your overall debt portfolio every month."

Many people are accustomed to evaluating their mutual funds every month, Larsen says. One's debts -- house, car, credit cards, student loans -- are a mirror image of one's assets. Larsen suggests taking a holistic view of assets and debts, and keeping track of your credit score. With this knowledge, you can pounce on opportunities to save money by moving to lower-rate debt.

Where Walters has a risk-taking attitude, and Larsen advises constant watchfulness, loan officer Robin Silverberg of IPI Skyscraper Mortgage on Long Island has a more cautious, laid-back outlook. She believes that if you don't know how long you will live in your home, it's probably better to get a fixed-rate loan. As befits someone with a degree in counseling, Silverberg listens closely to borrowers to figure out what kind of loan they need, even if that's not the loan they're asking for.

When she receives an application, she has an idea of the client's age, marital status, whether there are children, whether a borrower is paying child support. She gets a sense of the client's spending habits -- is he leasing a car for $250 a month or $800 a month? "You really do get an idea of what the person is like, and where they're buying a home, how much they have in savings -- and sometimes you try to steer them in a direction that might be a little different."

Silverberg wants to know whether a home buyer plans to stay in the house for more than five to seven years. She suggests ARMs to people who are sure they will move to another house within a few years. She often suggests ARMs to newlyweds buying their first co-op, because they probably will move.

But when clients buy single-family houses and don't know how long they will stay there, she usually steers them toward 30-year, fixed-rate loans. Such a borrower might stay in the house longer than expected. "I know how quickly five or seven years go by," Silverberg says. "It seems that most of the time it makes sense to suggest the fixed-rate loan in our area of the country for people buying single-family homes."

While Silverberg thinks it doesn't hurt to reconsider one's loan options when circumstances change, she also thinks it's not necessarily a pressing matter that needs to be addressed every year. It boils down to temperament: whether you prefer to spend time pursuing the best deal and assuming more risk, or whether you prefer to get a good deal and then not think about it unless you need to.