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Best Mortgage Rates for Shorter Term Home Loans

Posted by  on Oct 12, 2010
 

Very Best Mortgage Rates

The 30-year, fixed-rate mortgage (FRM) is currently by far the most popular form of home loan. The opportunity to lock in borrowing for such a long period at something so close to the country's record lowest mortgage rates is extremely tempting.

But if you're thinking of buying a home or refinancing, should you look at shorter-term loans? After all, some of the very best mortgage rates ever are to be found among 15-year and 20-year FRMs.

For example, in its latest figures, released June 3, Freddie Mac says that current mortgage rates for 15-year FRMs average 4.2 percent. That's the lowest since the organization started compiling figures for this sort of loan, and compares with 4.79 percent for the same mortgage over 30 years.

A 20-Year Mortgage Loan?

Earlier this month, the New York Times ran a feature under the headline "The 20-Year Mortgage Alternative". The piece was aimed particularly at those who are thinking of refinancing, and argued that low current mortgage rates mean that many could cut their term to 20 years with only a small increase in monthly payments. That argument is particularly strong for those with jumbo mortgages, but you can see how such a move would affect you personally by using the shoprate.com mortgage calculator.

The Times piece suggested that taking a shorter term mortgage loan would be particularly appropriate for borrowers who:

  • Are comfortably off
  • Plan to remain in their home for a long time
  • Wish to have a mortgage-free retirement

Good Advice

As the Times pointed out, the advantages of shorter term home loans go beyond the very tempting prospect of being mortgage-free years earlier than otherwise. You can make enormous savings in interest payments too.

It gave the example of a borrower who took out a mortgage of a million dollars this time in 2006 at the then rate of 5.875 percent. Even allowing for refinancing charges, that person would save nearly $380,000 in interest by switching to a 20-year mortgage loan now. And they'd be free of the commitment in 2030 instead of 2036. That savings figure and those dates become even more compelling for anyone who can afford to refinance to a 15-year loan.

Compare Mortgage Rates

Whatever your circumstances, and whether you're planning to refinance or buy a home, it's absolutely essential to find the very best loan you can. To start that process, compare mortgage rates here.

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