If you are wondering whether you should do a fixed rate or an ARM, a 30 year or 15 year loan, let us tell you what the statistics are.
Freddie Mac published that borrowers who refinanced during this first quarter of 2012, 31 percent reduced their loan term by paying of their loan sooner and replacing their 30-year loan with a 20-year, 15-year or even shorter term.
Freddie Mac also stated that 66 percent of borrowers have kept their same term as the loan they had paid off.
Now what about an ARM (Adjustable Rate Mortgage) versus a fixed rate mortgage? Well according to Freddie Mac, during the first quarter of 2012, 68 percent of borrowers who had an ARM refinanced to a fixed rate. Only 32 percent of borrowers chose to refinance and keep an ARM.
When choosing between an adjustable rate mortgage and a fixed rate, you need to consider where interest rates will be in the coming years. Initially and ARM is a risk in hopes that interest rates will decrease or be the same when you need to refinance and choose another rate. However, right now, interest rates are so incredibly low, it may make more sense to do a fixed rate mortgage and keep these low rates for the entire term of your loan. We have never seen rates this low, so it would be a big risk to hope in three or five years rates will remain this low.
The first quarter of 2012, the fixed rate mortgages averaged 3.92 percent for 30-year loans, and 3.19 percent for 15-year loans; both extremely low averages!
If you are a borrower that is looking to lower your interest rate, keep in mind you can lower it further by lowering your term. Speak to a mortgage planning specialist to determine what is in your best financial interest.
Regarding HARP (Home Affordable Refinance Program), we have noticed that most people are refinancing to lower terms. From our experience with the desktop underwriter, a 30 year loan has yet to be approved. Most borrowers are saving money and paying of their loan earlier with a 20-year or 25-year mortgage. It’s beneficial from all sides – lowering the interest rate, lowering the monthly payment, and paying the loan off sooner.
If you are interested in refinancing to a fixed rate mortgage, lowering your term, or any other refinancing reason, you should speak with a mortgage professional at Stateline Funding Corp.
Certified Mortgage Planning Specialist
A good mortgage lender should be able to discuss your mortgage payment in detail with you to help it fit your financial situation. They should also be able to offer advice in ways to help improve your credit if your score is too low, or other issues occur on your credit report.
More importantly, a great mortgage lender would get you a pre-approval, not a pre-qualification before letting you look for a home. There is a big difference. A pre-qualification is based on their opinion and brief financial information gathered from you that you qualify. A pre-approval, specifically with Stateline Funding Corp., guarantees you are approved to purchase a home.
Interest rates are important. However, what many consumers don’t realize is interest rates change daily. For example, you may get a quote from one mortgage lender on a Monday, and the next Tuesday you get a quote that is higher. This is typically not the lender’s doing, but due to the fact that the interest rate changed within those 24 hours.
This is why you need to work with a certified mortgage planning specialist who understands what causes the interest rates to fluctuate. When selecting a mortgage lender, you want to have a mortgage planning specialist who knows how to monitor interest rates in real time and watches them daily to guarantee the best rate possible.
Reputation & Reviews
Seek advice and recommendations from family and friends. Referrals are a great way to find a mortgage lender that you can trust. You can also read reviews online. At Stateline Funding Corp., we encourage our clients to leave a review after each transaction so others can learn from their experience with our company. A company should be transparent and have real reviews from clients who have experienced doing business with the company.