Compare Refinance Quotes
National Mortgage Rates 14 February 2012
| Loan Type | Today | +/- | Last Week |
|---|---|---|---|
| 15 yr fixed | 3.10 |
|
3.12 |
| 30 yr fixed | 3.80 |
|
3.81 |
| 5/1 ARM | 2.73 | - | 2.73 |
Rates may contain points
ARMs, 15-Year Loans Offer Big Savings
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- Kirk Haverkamp - MortgageLoan.com
If you’re looking to refinance your mortgage or buy a home, it’s a great time to consider a 15-year fixed-rate or an ARM for your new loan.
Interest rates on both are not only at or near historic lows, the spreads between them and 30-year fixed-rate mortgages are at or near the greatest they’ve ever been, with 5-year ARMs running more than three-quarters of a percent lower, according to Freddie Mac.
With 30-year mortgages already close to historic lows, that combination makes them an unusually attractive opportunity for borrowers seeking to refinance their current mortgage or even buy a new home.
Comparing mortgage rates
Here are the basics: according to the Feb. 11, 2010, Freddie Mac weekly market survey, newly written 30-year fixed-rate mortgages were averaged 4.97 percent, an exceptionally good rate by any standard. By comparison, U.S. lenders were charging an average 4.34 percent for 15-year fixed-rate loans, and a stunningly low 4.19 percent on 5-year Treasury indexed hybrid ARMs – both within a few basis points of their all-time lows.
What this means is that borrowers may wish to give serious consideration to either type of mortgage if they’re currently seeking to buy a home or refinance. In concrete terms, since the first of the year, the 5-year ARM has been running about three-quarters of a percent lower than the 30-year mortgage, and the 15-year fixed has been holding around six-tenths of a percent lower for most of the past six months. These are considerably greater than their historic norms, which tend to range between one-quarter and one-half a percent less than the 30-year rate.
Faster payoff, similar payment
The 15-year refinance is particularly attractive for someone who has had a 30-year mortgage for a number of years and is looking to refinance. In fact, depending on your current rate and how long you’ve had the loan, you could refinance into a 15-year mortgage for about what you’re paying right now.
For example, if you took out a $250,000 loan in early 2002 at 7 percent interest, refinancing the remainder over 15 years at 4.35 percent would yield approximately the same monthly payment – around $1,690. With a lower rate or a loan taken out more recently, you could still refinance into a 15-year loan for an increase of $200-300 in your monthly payment, thereby paying off the loan faster and saving tens of thousands of dollars in interest over the life of the loan.
Good for short-time owners
The ARM is also interesting, though it needs to be approached carefully. Adjustable rate mortgages, of course, give you a lower rate for a fixed period of time, often 3-7 years, then reset to a new rate based on prevailing market conditions. This is a great way to save money if you’re only planning to be in the home a few years, since you’ll be selling the property before the rate resets.
Some financially sophisticated borrowers also like to use ARMs simply to get a lower rate than they can get on a fixed-rate loan, then periodically refinance when it comes time for the rate to reset. Because the ARM is typically designed to fully amortize over 30 years, the principal payments are lower than on a 15-year fixed, meaning monthly payments are considerably less, even though there currently isn’t that much difference between the interest rates on the two types of loans.
If you’re going to go the ARM route, you’ll want to be sure you’re buying or refinancing in a fairly stable housing market, so that you’ll have at least some equity in the property when it comes time to sell or refinance. On the 15-year mortgage, you want to be sure your finances will be able to handle the higher payments relative to a 30-year loan over an extended time. And, of course, you’ll need strong credit to obtain either type of mortgage under current market conditions.
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National Rates
| Loan Type | Today | +/- |
|---|---|---|
| 30 yr fixed | 3.80 | |
| 15 yr fixed | 3.10 | |
| 5/1 ARM | 2.73 |
Rates may contain points
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