Refinancing homeowners choosing 15-year home loans
Refinancing rates have slowed recently in spite of historically low mortgage rates, but among those homeowners who can qualify for a home refinance, 15-year fixed-rate mortgage loans have become more popular. The Mortgage Bankers Association (MBA) reported that applications for a home refinance decreased by 5.2 percent during the week ending September 30, 2011 compared to the previous week. The share of refinancing applications among all mortgage applications remained high at 79.1 percent, a slight drop from the previous week.
According to HSH.com, mortgage rates for a 30-year fixed-rate home loan dropped to 4.36 percent for the week ending September 30, while the average rate for a 15-year fixed-rate home loan was 3.63 percent. The average rate for a 5/1 adjustable-rate mortgage was 3.09 percent.
“Interest rates continued to fall last week, driven by the latest Federal Reserve actions to invest in longer-term Treasury and mortgage securities, but potential borrowers largely remained on the sidelines, seemingly unimpressed by the lowest (by any measure) mortgage rates since the 1940s,” Mike Fratantoni, MBA’s vice president of research and economics, said in a statement. “Refinance application volume declined and purchase volume was little changed. Many refinance borrowers are opting to deleverage by moving to a 15-year term, with this product accounting for 27 percent of refinance volume last week.”
Fifteen-year mortgage popularity
The MBA says that for the month of August 2011, 30 percent of homeowners who refinanced chose a 15-year fixed-rate home loan, the highest number choosing that loan term since January 2011. Opting for a 15-year home loan allows you to take advantage of low interest rates while accelerating the payoff date for your mortgage. You can save thousands in interest payments over the life of the loan. The only reason not every homeowner opts for this shorter loan term is that your monthly payments rise because you have less time to repay your mortgage. Those higher mortgage payments sometimes make it impossible for you to qualify depending on your debt-to-income ratio. If you can qualify, the long-term financial benefits can be well worth the additional burden of higher payments.
