Mortgage rates rise for the week of July 7, 2014

Posted by  on Jul 14, 2014

After three straight weeks of falls, mortgage rates bounced back this week, ending up pretty much where they were in the second half of June. However, they remain highly attractive: On average, they have been lower than they currently are for only five of the last 55 weeks.

Current mortgage rates

By far the most popular type of home loan is the 30-year fixed-rate mortgage (FRM), and average rates for these rose six basis points over the week ending July 11 to 4.24 percent from 4.18 percent, according to HSH.com. Points also jumped to 0.17 from 0.14. Average rates for 15-year FRMs increased by the same amount, to 3.47 percent with 0.11 points, from 3.41 percent with 0.08 points a week earlier. Adjustable-rate mortgages (ARMs) also rose over the period, with 30-year 1/1 ARMs reaching 2.92 percent, up from 2.87 percent, though points for these remained steady at 0.11.

Our live database of current mortgage rates can help you find the best mortgage rates in your area.

Choosing the right term

You can see why 30-year FRMs are so popular. Many see the security of a fixed rate as well worth the higher interest charges -- especially when pretty much everyone expects rates to rise soon -- and the 30-year term spreads the load, so monthly payments are affordable. Probably most people buying homes or looking to refinance are right to go for one of these.

But, if your circumstances allow you to, choosing a 15-year FRM can be a very smart move. The shorter term means your payments will be higher, but you should save a bundle over the lifetime of the loan -- and you could be free of your mortgage in 180 months. How big a bundle might you save? Let's use our mortgage calculators to create an example. Obviously, you can use those calculators to try out your own models.

How much you can save

For our example, we'll assume you want a $250,000 loan and are going to pay the current average rates quoted above. If you go for a 30-year FRM at 4.24 percent, your monthly interest and repayment payments should be $1,228.39. Opt for the 15-year FRM at 3.47 percent, and those same payments should be $1,783.53. Ooh! That hurts. You probably need to have owned a home for a number of years and to be at a good point in your career to stand a chance of managing that higher payment.

But, if you can, the rewards are phenomenal. Not only are you paying a lower rate, but you are doing so over half the time. So the total interest you pay on the shorter loan should be $71,035, compared to an eye-watering $192,219 for the 30-year option. That's a savings of more than $120,000.

Don't feel bad if you can't afford a 15-year home loan. Few can. But, if you are able, it's well worth thinking about -- as are 20-year terms, which many lenders offer and which provide proportionately smaller but still very attractive benefits. You can kick off your search for your perfect loan when you compare mortgage rates today.

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