Archive for the ‘15-year fixed rate mortgage’ Category

Fifteen-Year Mortgages Gain Market Share

Tuesday, December 18th, 2012

As interest rates just keep sinking lower and lower, the fifteen-year fixed rate mortgage (FRM) is making a stronger showing these days.

According to mortgage backer Freddie Mac, almost 16 percent of all the fixed rate loans the company bought in the third quarter of 2012 were 15-year mortgages. That’s up from about 10 percent the year before. And mortgage data firm CoreLogic reported that 15-year FRMs made up roughly one-third of all refinanced home loans in the first seven months of the year, up dramatically from the end of the housing boom when they made up just 8.5 percent of all refinances.

Up until a few years ago, the 15-year mortgage was just too expensive for most homeowners, but with today’s rate at all-time lows the cost differential is almost negligible for many. For example, during the past week , the 15-year

FRM carried an average rate of 2.66 percent, excluding fees, according to Freddie Mac, down from 3.21 percent last year. By contrast, the average rate on a 30-year FRM last week was 3.32 percent, and while still near historic lows, the spread between the two loans has widened. The difference between the two rates is now 0.66 percentage points, where it used to be between 0.25 and 0.35 percentage points before the latest housing bust, according to home loan data site HSH.com.

How does that play out in a refinance situation. The gave the following example:

A couple who signed up for a 30-year $300,000 mortgage in January 2004 with a 5.75% fixed rate would have a roughly $1,751 monthly payment. By refinancing the remaining balance of about $255,828 into a 15-year fixed rate loan at 2.81%, the new monthly payment would be slightly lower at almost $1,744.

So, in today’s market, those planning to stay in their homes long-term can reap the benefits of the lowest rates without having to pay much more, if at all. In the long run, that could add up to tens of thousands of dollars in interest savings. And more good news – the Federal Reserve has all but guaranteed that mortgage interest rates will stay at rock-bottom lows at least through the next year, which means these savings will be available for some time to come.

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