Mortgage rates hold steady for week of August 30, 2010
Mortgage rates for the week leading up to the Labor Day weekend remained largely unchanged with rates for 30-year fixed rate mortgages dipping slightly. Homebuyers and homeowners continue enjoying excellent opportunities for buying and refinancing homes.
Average combined mortgage rates for last week remained mostly static, with HSH Associates reporting average combined rates for a 30-year FRM dropping by two basis points to 4.76 percent. Mortgage rates for 15-year FRMs and 5/1 ARMs remained the same as the previous week at 4.24 percent and 3.73 percent respectively.
Mortgage loans and refinancing: Thinking outside the 30-year box
Mortgage lenders view shorter repayment terms as being less risky, so they typically charge lower rates for 15-year than for 30-year mortgage loans. Although the 30-year FRM is the workhorse of the U.S. mortgage lending industry, shorter term mortgages such as 15-year and 20-year mortgages are worth looking into if you can afford the higher payments, because the shorter term can save you money up front and throughout the life of the loan. Another way to obtain lower loan costs is through an ARM.
How an adjustable rate mortgage works
The 5/1 ARM loan provides a fixed rate for the first five years, after which it converts to an adjustable rate loan. With average combined ARM rates currently a full percentage point lower than 30-year FRM rates, this type of mortgage loan can save money for borrowers who plan to sell or refinance their homes within five years. A word of warning though: Beware of prepayment penalties designed to discourage you from paying off or refinancing your loan before a certain date. Ask prospective mortgage lenders about prepayment penalties on any mortgage quotes you're considering.
Shorter repayment terms: New mortgage options for a new economy
A 30-year fixed-rate loan can be an excellent value at today's mortgage rates, but short-term options for home loans can help borrowers save with lower mortgage rates, lower interest totals and faster growth of equity. Providing short-term mortgage loans with a guaranteed option for renegotiating mortgage terms when the loan term expires would make balloon loans (which must be refinanced at the end of the loan term) less scary in today's economy.
Our live database of current mortgage rates can help you find the best mortgage rates in your area.
