15-year loans popular among refinancers

Mon, Aug 15, 2011


Mortgage rates hit near record lows last week when nervous consumers and international investors rushed to buy United States treasury bonds. As a result, more people are moving to refinance.

Roy Clennan, president of local mortgage brokerage firm Freedom Financial Services, said he’s seen a surge of calls about refinancing options. Call volume is up about 20 percent, he said.

Not everyone who asks about refinancing acts, he said. But it is a good option for many who weren’t eligible for refinancing during the last few big drops in interest rates because they were still in the fixed rate years of their adjustable rate mortgage, Clennan said.

“There is no such thing as a serial refinancer,” Clennan said. “These are all people who are considering it for the first time.”

And many of them are weighing the advantages of 15-year fixed rate mortgage. Rates for those mortgages are down to 3.5 percent this week from a near-record low of 3.56 percent last week.

“With rates as low as they are, people are seeing that payments aren’t that much higher with a 15-year loan,” Clennan said.

Going with a 15-year fixed rate mortgage has the potential to save home buyers and homeowners who refinance thousands in interest payments. And payments wouldn’t vary all that significantly.

If a homeowner with a $160,000 loan is paying 6.7 percent on an adjustable rate mortgage, monthly payments would average $1,032. The same loan at 3.5 percent for 15 years, would cost $1,143. But over the life of the loan, the borrower with the 30-year note would pay almost $166,000 more.

Clennan said he expects the 15-year mortgage to be a popular refinancing option as long as interest rates remain at these lows.

“There’s no way to know how long rates will stay this low,” Clennan said.

While the Federal Reserve announced last week that it would keep rates low until at least the middle of 2013, Clennan said current rates are something to consider.

“You just can’t get much lower than zero,” he said.

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