When buying your first home, you will no doubt have plenty of questions. If you are not familiar with all of the terms, this can be somewhat tricky. You may wonder, "what kind of mortgage should I go with?" If you already own a home, you might be asking yourself if refinancing is right for you, and if so, what kind of loan should you go with and how long of a term?
We are not here to tell you what to do, but we can give you some statistics to help you make a decision.
In the fourth quarter of 2011, 95% of all refinanced loans were "fixed-rate mortgages" (FRM). An increasing number of current homeowners who are refinancing also opted to shorten their loan terms. 43% of borrowers who paided off a 30-year FRM chose to go with a 15- or 20-year loan.
The average fixed mortgage rates for that time period were 4% for a 30-year loan, and 3.3% for a 15-year. Since interest rates have been at historic lows recently, now is a good time to apply for a loan, or to refinance your current one. We have been seeing strong refinance activity into fixed-rate loans, and no doubt will continue to. If you have been considering refinancing your home, motivated by these low fixed-rates, you could actually obtain an even lower rate if you were to shorten your term as well. The interest rate on a 15-year FRM was on average about 0.7 percentage points lower than the 30-year FRM during the fourth quarter of 2011.
However, if you are only planning on staying in your home for a few more years, the hybrid adjustible-rate mortgage (ARM) may give you even greater interest rate savings. The initial interest rate on a 5/1 hybrid ARM was 1.1 percentage points lower than the 30-year fixed rate loan. 58% of borrowers who had a hybrid ARM switched over to a FRM instead but the remaining 42% did indeed refinance again with the hybrid ARM.
As you can see, there are many options. We encourage you to continue researching the different kinds of rates to find the best one for you. If we were to just consider the stats, though, the most dominant choice for refinancers continues to be the fixed rate loans. If you have any questions, feel free to contact us at 1-888-883-5252 and we will help you make the correct decision.
Sunday
Is it possible to "buy" a better rate?
Even if you're unsure of how long you plan to keep your mortgage before you move or refinance, paying points now for a lower rate may make sense. For example, do you have a high-paying job now but you think you might change careers in the next few years? We can help you sort it out. It's part of our goal to find you the right loan for your means and future.
A point -- which equals one percent (1%) of the total loan amount -- is an up-front fee that lowers your annual interest rate and total interest due over the life of your loan. So, a one point loan will have a lower interest rate than a no point loan. Basically, when you pay points you trade off paying money later in favor of paying money now. You can pay fractions of points, meaning there are a lot of points packages that can make a loan's terms more favorable if that's what's right for you.
There are a variety of rate and point combinations available. When you look at different loan programs, don't look just at the rate -- compare the whole package. Federal law requires lenders to publish their loans' Annual Percentage Rate, or A.P.R. The A.P.R. is a tool used to compare different terms, offered rates, and points.
Tuesday
What are the current rates?
According to Freddie Mac's Primary Mortgage Market Survey, mortgage rates have dropped even more! They are now at NEW all-time record lows. This includes all rates except for the 1-year ARM which didn't reach a new low.
- 30-year fixed-rate mortgages (FRM) are averaging at 3.87 percent. This time last year it was at 4.81 percent.
- The 15-year FRM averaged 3.14 percent which is down from 4.08 percent last year.
- The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 this week and was at 3.69 last year.
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