Mortgage Rates Drop Dramatically
Mortgage rates are at lows not seen for decades. And, since Freddie Mac began officially tracking rates in August 1991, things have not been this good for mortgage borrowers. MarketWatch offers interest rate information for this past week:
The 30-year fixed-rate mortgage averaged 4.87% last week and 5.88% a year ago.
Fifteen-year fixed-rate mortgages averaged 4.48% for the week ending April 16, down from 4.54% last week and 5.40% a year ago. This week’s average is the lowest for the mortgage since Freddie Mac began officially tracking it in August 1991.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.88%, down from 4.93% last week and 5.48% a year ago.
Now could be the time to refinance to a 15-year loan
With rates so low, it might be a good time to refinance your home mortgage loan. Indeed, a 15-year mortgage loan might be the best choice. I’ve done the math, and for $100 more a month, I can refinance my 30 year mortgage to a 15-year mortgage at the 4.48% rate. That would help me build equity faster and save tens of thousands of dollars in interest on my mortgage. However, even if you refinance to a 30-year mortgage, you can still save thousands on your mortgage interest. It all depends on the terms you end up with. Indeed, a home — or a refinance — is one of the things that you should buy during a recession.
Avoid the ARMs
It may seem silly to recommend that you not buy an ARM. After all, part of the reason we’re in this mess is due to all the ARMs that were offered between 2000 and 2007. However, some people might find ARMs attractive for a variety of reasons. Teaser rates are still out there, and some mortgage lenders are still providing these loans. I think most of us have learned a lesson, though. But just in case you are tempted, realize that 30-year fixed rates are still lower than Treasury-indexed 5-year ARMs.
