Today's Rates In Vermont
Looking to buy a home in Vermont? Well, unless you've got your own green mountain of money, you'll probably need to get a mortgage if you want to buy a home in the Green Mountain State.
Vermont residents sometimes like to joke that their rural state is a bit behind the times, but when it comes to mortgages, it's been ahead of the curve. Concerned about the possibility that easy credit could lead borrowers into financial difficulty, the state enacted its own "ability to repay" mortgage rules in the 1990s and early 2000s. Those helped Vermont weather the ensuing foreclosure crisis in somewhat better shape than many other states.
Finding the best Vermont mortgage rates is easier than it was just a few years ago. The arrival of online mortgage lending makes shopping for a mortgage much more convenient. No longer do you have to make endless phone calls or trips to the office of a Vermont mortgage company to gather information, request rate quotes and submit your application materials. It can all be done online, from home.
Not only that, but online lending gives you a broader selection of lenders to choose from. Your options aren't just limited to a Vermont mortgage company nearby, you can get a loan from a mortgage lender on the other side of the state, or even one who doesn't even have an office in Vermont! As long as the lender is licensed to do business in Vermont, nearly everything can be done online. And more lenders mean more choices for you and more opportunities to find the best combination of a low rate and fees for your loan.
When shopping for Vermont mortgage rates, a big factor will be the type of loan you choose. Let's take a look at several of the most common ones offered by Vermont mortgage lenders and how they affect the rate you get.
For home purchases, the most common type of Vermont home loan is the 30-year fixed-rate mortgage. This loan offers a combination of low monthly payments, by spreading the term out over 30 years, and the security of an interest rate that never changes, meaning your mortgage payments never change either (though hazard insurance and taxes may increase).
A similar option, the 15-year fixed-rate mortgage, offers lower interest rates than the 30-year variety and is popular with Vermont borrowers who are refinancing a mortgage they've had for a number of years. This can often get them a lower rate while allowing them to pay the loan off a few years faster, at considerable savings in interest.
A 15-year mortgage may also be chosen as a home purchase option by borrowers who can afford the higher payments, perhaps because they've chosen a more modest home or have substantial equity in their previous home they can apply to the purchase of a new one. Some lenders also offer 20- and 10-year fixed-rate loans, though these are less common.
The other major type of home loan is the adjustable-rate mortgage, or ARM. Rather than locking in your original interest rate for the life of the loan, an ARM allows the interest rate to vary over time to reflect current market conditions. This allows you to get a lower initial rate than on a comparable fixed-rate loan, because the lender isn't committing to a set rate for a long period of time.
Most ARMs are structured to give you an initial fixed rate for a certain period of time, often 3, 5, or 7 years, and then adjust every year thereafter. These are commonly given names like 3/1, 5/1 or 7/1 to reflect this setup. Other variations are also available, however.
ARMs are good choices for Vermont homebuyers who expect to move again or refinance in a few years, because they don't need to lock in a rate for three decades. They're also good when interest rates are high and likely to fall over the coming years.
Refinancing is simply a matter of replacing your old home loan with a new one. You take out a new loan, which is used to repay the old one, and move forward from there. Vermont borrowers refinance for a variety of reasons, one of the most common being in order to switch to a lower rate than they're currently paying. But homeowners may also refinance in order to reduce their monthly payments by re-extending the loan term, to switch from an ARM to a fixed-rate, to pay their loan off faster, to cancel mortgage insurance on an FHA loan or for other reasons.
The same types of Vermont mortgages used for a home purchase can also be used for refinancing. Vermont mortgage rates are largely the same regardless of whether you're buying a home or refinancing – those are more affected by the borrower's credit score, down payment/home equity and the length of the loan, rather than the mere fact you're refinancing.
Traditionally, borrowers were told they should have at least 20 percent home equity before refinancing, in order to avoid paying for private mortgage insurance (PMI) and to get the best rates and terms. However, many lenders will approve refinancing with considerably less than that.
There are options available that allow borrowers to refinance even if they have little or negative equity (being underwater on the loan). Both the FHA and VA offer options for Streamlined Refinances, which allow underwater or low-equity borrowers to refinance provided they have a good payment history. A similar option is available to borrowers with conforming loans backed by Fannie Mae or Freddie Mac that replaced the former Home Affordable Refinance Program (HARP), which expired at the end of 2018.
Home Equity Loans
Home equity loans are a special type of mortgage that allow you to borrow against the value of your home, rather than being used to pay for the home itself. Because they're secured by your home equity – the paid-off portion of your home's value – Vermont home equity loan rates are often considerably lower than rates on other types of loans.
There are two main types of home equity loans in Vermont. They are:
- A traditional home equity loan, where you borrow a sum of money and repay it on a schedule similar to a regular mortgage. Traditional home equity loans typically have fixed rates and are repaid over terms ranging from 5-15 years.
- A home equity line of credit, or HELOC. HELOCs give you a line of credit you can borrow against as you wish. HELOCs have adjustable rates and are often set up as interest-only loans during the draw period when you can borrow against them, providing financial flexibility. The draw period on a HELOC usually ranges from 5-10 years, with a 10-20 year repayment phase after.
To qualify for a home equity loan or HELOC, you generally want to have enough home equity that you'll have at least 20 percent equity remaining after taking out the loan. Many lenders will allow you to go lower, but expect to pay higher fees or interest rates.
A cash-out refinance is another option for borrowing against your home equity. This involves refinancing your primary mortgage for a higher amount that you currently owe, then receiving the difference in cash. Cash-out refinances tend to have lower rates but higher closing costs than traditional home equity loans, so they work best if you can lower your current mortgage rate in the process or are looking to borrow a large sum.