Mortgage rates have flattened out, but some borrowers are lowering their rates further by opting for a loan with a shorter term.
Freddie Mac says about 30% of borrowers this year have opted for shorter-term home loans when they refinance, with most picking a 15-year mortgage. Shorter-term loans are particularly attractive to people “who have been homeowners for a number of years…or who want the security of knowing they will own their home free and clear when they retire,”
I recently refinanced a first mortgage and home-equity loan for a couple that were in their early 50’s. Their goal was to try to pay off their mortgage and be free and clear about the time they expect to retire. Many of my clients are switching to a 15-year mortgage as they refinance for the second or third time.
Rates on conforming 15-year fixed-rate mortgages currently are running at or below 3%, compared to the 30 year fixed-rate mortgages averaging in the 3.5% range.
Choosing a shorter-term loan can mean a significant drop in interest charges over the life of the loan. A borrower would pay a total of $85,066 in interest on a $350,000, 3.00% 15-year fixed-rate mortgage. On a $350,000, 30-year mortgage with a 3.50% rate, the borrower would pay $215,795 in interest.
Because it gives you less time to repay your loan, a 15-year mortgage isn’t for the cash-poor. The monthly payment on the $350,000 loan with a 15-year term would be about $2, 417,—much more than the $1,572 payment on the 30-year fixed-rate mortgage.
Before opting for a 15-year mortgage, borrowers should consider whether they have other pressing financial needs, such as an emergency fund, saving for retirement or financing a child’s college education. A 15-year loan also might be a risky choice if you are worried about job security or the stability of your income.
St. Louis MORTGAGE INTEREST RATES for December 19, 2012:
- Conventional 30-Year Fixed 3.500%/ 3.777% APR
- Conventional 15-Year Fixed 3.000%/ 3.097% APR
- Conventional 7/1 ARM 2.625%/ 3.332% APR
- FHA/VA 30 Year Fixed 3.25%/4.160% APR
- Jumbo 5/1 ARM 2.625%/ 2.426% APR
- Jumbo 15 yr Fixed 3.000%/ 3.094% APR
- Jumbo 30 yr Fixed 4.625%/ 4.719% APR
*The above mortgage rates are based upon an 80% LTV, o/o single family with FICO scores of 720.
Paramount Mortgage is a locally owned Mortgage Banker celebrating our 41st year. Great rates and programs are secondary to what is most desired in a lender relationship: Integrity, Communication and Customer Satisfaction. Be to check out our website: www.paramountmortgage.com
For more information or if you have questions on mortgage rates you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.
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