Comparison of a 30-Year vs #mortgage #calcualtor


#15 year fixed mortgage rates

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Comparison of a 30-Year vs. a 15-Year Mortgage

A bewildering variety of mortgages is available, but for most homebuyers there is, in practice, only one.

The 30-year-fixed mortgage is practically an American archetype, the apple pie of financial instruments. It is the path that generations of Americans have taken to first-time home ownership. According to the Mortgage Bankers Association, 86% of people applying for purchase mortgages in February 2015 opted for 30-year loans.

But many of those buyers might have been better served if they had opted instead for a 15-year fixed-rate mortgage ; the 30-year’s younger, and less popular, sibling. The loans are structurally similar – the main difference is the term. (See also, A Guide to Buying a House in the U.S. )

A shorter-term loan means a higher monthly payment, which makes the 15-year mortgage seem less affordable. But, in fact, the shorter term actually makes the loan cheaper on several fronts – over the full life of a loan, a 30-year-mortgage will end up costing more than double the 15-year option.

How the Term Affects the Cost

The main driver of higher costs is time. A mortgage is simply a particular kind of term loan – one secured by real property – and in a term loan, the borrower pays interest calculated on an annual basis against the outstanding balance of the loan. Both the interest rate and monthly payment are fixed.

Because the monthly payment is fixed, the portion going to pay interest and the portion going to pay principal change over time. At the beginning, because the loan balance is so high, most of the payment is interest. But as the balances gets smaller, the interest share of the payment also declines, and the share going to principal increases. (For further explanations, see Investopedia’s tutorial Mortgage Basics .)

In a 30-year-loan, of course, that balance shrinks much more slowly – effectively, you’re renting the same amount of money for more than twice as long. (It’s more than twice as long, rather than just twice as long, because in a 30-year mortgage, the principal balance does not decline at as fast a rate as in a 15-year loan.) When the interest rate is 4%, a borrower actually pays almost 2.2 times more interest to borrow the same amount of principal over 30 years compared to a 15-year loan.

Differences in Interest Rates

Moreover, because 15-year loans are less risky for banks than 30-year loans, and because it costs banks less to make shorter-term loans than longer-term loans, consumers pay a lower interest rate on a 15-year mortgage – anywhere from a quarter of a percent to a full percent (or point) less. And the government-supported agencies that finance most mortgages impose additional fees, called loan level price adjustments, which make 30-year mortgages more expensive.

Fannie Mae and Freddie Mac charge price adjustments to borrowers who have lower credit scores or are putting down less money.

“Some of the loan level price adjustments that exist on a 30-year do not exist on a 15-year,” says James Morin, senior vice president of retail lending at Norcom Mortgage in Avon, Conn. Most people, according to Morin, roll those fees into their mortgage for a higher rate rather than paying them outright.

Imagine, then, a $300,000 loan, available at 4% for 30 years or at 3.25% for 15 years. The combined effect of the faster amortization and the lower interest rate means that borrowing the money for just 15 years would cost $79,441, compared to $215,609 over 30 years, or nearly two-thirds less.

The rub, of course, is the monthly payment. The price for saving so much money over the long run is a much higher monthly outlay: The payment on our hypothetical 15-year loan is $2,108, or nearly 50% more than the monthly payment for the 30-year loan ($1,432).

If You’re About to Retire

If you can afford the higher payment, it is in your interest to go with the shorter loan, especially if you are approaching retirement when you will be dependent on a fixed income.

For some experts, being able to afford the higher payment includes having a rainy day fund tucked away – according to Bob Walters, chief economist for Quicken Loans, your liquid savings should amount to at least a year’s worth of income. What financial planners like about the 15-year mortgage is that it is effectively “forced saving,” in the form of equity in an asset that normally appreciates. (Although like other equities, homes rise and fall in value.)

Weighing College and Retirement Savings Goals

There are some instances where a borrower may have incentives to save and invest that money elsewhere, as in a 529 account for college tuition or a 401(k) retirement account, where an employer matches the borrower’s contributions. And with mortgage rates so low, a borrower could, in theory, choose to borrow with a 30-year note, and invest the difference between that lower monthly payment and the higher amount he or she would have paid each month on the 15-year mortgage.

For example, in the previous example a 15-year loan monthly payment was $2,108 and the 30-year loan monthly payment was $1,432. A borrower could invest the $676 difference elsewhere.

The back-of-the-envelope calculation is how much (or whether) the return on the outside investment, less the capital gains tax you owe on it, exceeds the interest rate on the mortgage, after accounting for the mortgage interest deduction. (For someone in the 25% tax bracket, the deduction might reduce the effective mortgage interest rate from, say, 4% to 3%.)

This gambit, however, demands a propensity for risk, according to Shashin Shah, a certified financial planner in Dallas, because the borrower will have to invest in volatile stocks.

“Currently there’s no fixed-income investments that would yield a high enough return to make this work,” says Shah. It also requires the discipline to systematically invest the equivalent of those monthly differentials and the time to focus on the investments, which, says Shah, most people lack.

(For more on the special considerations of getting a mortgage at various life stages, see Getting A Mortgage In Your 20s and Getting A Mortgage In Your 50s .)

A Best-of-Both-Worlds Option?

Most borrowers evidently also lack – or at least think they lack – the wherewithal to make the higher payments required by a 15-year mortgage. But there is a simple solution for 30-year borrowers to capture much of the savings of the shorter mortgage: Simply make the larger payments of a 15-year schedule on your 30-year mortgage, assuming the mortgage has no prepayment penalty.

You are entitled to direct the extra payments to principal, and if you make the payments consistently, you will pay the mortgage off in 15 years. If times get tight, you can always fall back to the normal, lower payments of the 30-year schedule.

The Bottom Line

Many buyers would be well served if they opted for a 15-year fixed-rate mortgage instead of a 30-year mortgage. A lower interest rate and shorter term mean that you will pay considerably less for your loan.

And as Shah says: “There’s not a single client that we have who’s paid off their house that has ever felt bad about it.” The rub is the higher monthly payment, and it is sensible to weigh the value of a less costly mortgage against other savings priorities like college, retirement and a rainy-day fund.

(You may also be interested in reading 6 Tips To Get Approved For A Mortgage and Mortgages: How Much Can You Afford? )

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Social finance typically refers to investments made in social enterprises including charitable organizations and some cooperatives.

Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional.

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Average 30-year mortgage rate falls to % #commercial #mortgage


#30 mortgage rates

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Average 30-year mortgage rate falls to 3.62%

The Associated Press | Feb 25, 2016

WASHINGTON – Average long-term U.S. mortgage rates fell this week as anxiety over the global economy persisted. Long-term rates resumed their decline after being unchanged last week following six straight weeks of easing.

Mortgage buyer Freddie Mac said Thursday the average rate on a 30-year, fixed-rate mortgage slipped to 3.62% from 3.65% last week. That puts it well below the 3.80% it marked a year ago.

That was the lowest level for a 30-year fixed rate since early February of last year.

The average rate on 15-year fixed-rate mortgages declined to 2.93% from 2.95% last week.

Mortgage rates have continued to fall despite the Federal Reserve’s decision in December to raise the short-term rate it controls for the first time since 2006.

Global economic worries and turbulence in world stock markets have pushed up prices of U.S. government bonds as investors seek safety. That has depressed the yields on the bonds, which mortgage rates follow. The yield on the 10-year Treasury bond has dropped to strikingly low levels below the significant 2% mark.

The benchmark yield stood at 1.75% Wednesday, down from 1.81% a week earlier. The yield fell further to 1.70% Thursday morning. That compares with 2.27% before the Fed’s rate hike on Dec. 16.

Despite the decline in mortgage rates this year, new government data show that Americans stepped back from buying new homes in January, as purchases plunged sharply in western states where prices are typically higher.

The Commerce Department said Wednesday that new-home sales fell 9.2% last month to a seasonally-adjusted annual rate of 494,000. Most of the decline stemmed for a 32.1 drop in sales in the West. Sales also slipped in the Midwest, while edging up in the Northeast and South.

Continue reading below

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Mortgage Marvel Rate Trends Shows 30-Year Fixed Rates Fell in April #mortgage #rate #charts


#mortgage marvel

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Mortgage Marvel Rate Trends Shows 30-Year Fixed Rates Fell in April

MEQUON, WI–(Marketwire -05/02/12)- Mortgage Marvel Rate Trends™, a daily survey of more than 1,000 lenders, shows conforming, 30-year, fixed rates fell in April, closing out the month at 3.96 percent. Late in the month, the economic news from Europe continued to be negative, which led investors to seek the safety of U.S. Treasury notes. Increased buying drives down interest rates on these notes, and mortgage rates track these rates closely. This is clearly good news for those looking to buy or refinance a home.

“Most economists are indicating that rates will continue to stay low,” said Rick Allen, chief operating officer of Mortgage Marvel. “The housing market is warming up and mortgage interest rates are staying low, which runs counter to most expectations. Consumers should consider acting now if they are looking to refinance a mortgage or purchase a home.”

30-Year Fixed Rate – As of April 30, 2012

The 30-year fixed rate on April 30 was 0.31 percent lower than the 6-month high of 4.27 percent reached on Oct. 30, 2011.

30-Year Fixed Rate – Highs Lows

*Change based on difference from current rate

Other popular products

Fifteen-year fixed rates also headed lower in April, closing out the month at 3.2 percent after reaching a high of 3.35 percent on April 4. 5/1 ARMs fell as well to 3.18 percent on April 30 after hitting a high of 3.33 percent on April 2. The rates for 30-year, fixed rate jumbo loans (typically loans over $417,000) closed the month at 4.74 percent after reaching a high of 5.02 percent on April 5.

For comparison sake, displayed rates feature 0 discount points unless otherwise indicated. The assumed loan amount and loan-to-value ratio are $500,000 and 66% for jumbo loans and $187,500 and 75% for all other programs.

For more detailed information, including an interactive graph and state-level detail, go to www.mortgagemarvel.com/mortgageratetrends/ .

About Mortgage Marvel Rate Trends

Mortgage Marvel Rate Trends pulls rates every day directly from the live product and pricing database of more than 1,000 national, regional, and local banks and credit unions across the country. Mortgage Marvel Rate Trends includes average rates for conforming (i.e. loans below $417,000) and jumbo loan programs across all common fixed and adjustable rate products. Mortgage Marvel Rate Trends also separately tracks rates for purchase, rate term refinance, and cash-out refinance transactions for every product and program, and for every state and region in the U.S.

About Mortgage Marvel and Mortgagebot

Mortgage Marvel (www.MortgageMarvel.com ) presents free, accurate, up-to-date mortgage quotes from multiple lenders in an easy-to-understand display. It further enables borrowers to link directly to their preferred lender — where they can complete a mortgage application and get approved with full disclosures, all in about 20 minutes or less.

Mortgage Marvel is operated by Mortgagebot LLC (www.Mortgagebot.com ), the industry-leading, Inc. 5000 company that provides the unique, award-winning PowerSite family of integrated point-of-sale (IPOS) solutions. Mortgagebot blends deep mortgage experience with innovative “cloud-computing” technology to create scalable and affordable Web sites for nearly 1,000 banks and credit unions nationwide.


30-Year Fixed Rate Mortgage Payment Calculator: Free Online Home Loan Calculator #usda #mortgage


#mortgage loan calculator with taxes

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As you can see, your payment will vary depending on how much you will be borrowing, the interest rate, and the length of your loan. Other factors also need to be taken into consideration, such as your taxes, your insurance, and your PMI, all of which are included in your monthly house payment. Even the value of your home will affect your payment.

Just as an example, let’s say you are borrowing $250,000.00 for 30 years with an interest rate of 5.000%. If the value of your home is $300,000.00, your property taxes $3,000.00 per year and your insurance is $1,500.00 per year, you can expect to be making a total payment of $1,821.22. This is because you need to pay $1,342.05 toward the actual loan, plus $250.00 for real estate taxes and $125.00 toward insurance.

Since your loan to value ratio is 83.33%, you will also have to pay PMI for 31 months and this will tack on an extra $104.17 a month. Don’t forget to drop the PMI when the 31 months is complete and you might save yourself some money each month, but remember, that, in most cases, you will need to finish re-appraisal process to do so.

Add All Fixed Costs and Variables to Get Your Monthly Amount

Figuring out whether you can afford to buy a home requires a lot more than finding a home in a certain price range. Unless you have a very generous and wealthy relative who’s willing to give you the full price of your home and let you pay it back without interest, you can’t just divide the cost of your home by the number of months you plan to pay it back and get your loan payment. Interest can add tens of thousands of dollars to the total cost you repay, and in the early years of your loan, the majority of your payment will be interest.

Many other variables can influence your monthly mortgage payment, including the length of your loan, your local property tax rate and whether you have to pay private mortgage insurance. Here is a complete list of items that can influence how much your monthly mortgage payments will be:

Interest Rate

The most significant factor affecting your monthly mortgage payment is your interest rate. For example, on Nov. 27, 2013, the average national rate for a 30-year fixed-rate mortgage was 4.33 percent. If you buy a home for 200,000, which is under the national average, your monthly payment would be $993.27, and you would pay $157,576.91 in interest alone. If your interest rate was only 1 point more, your payment would increase to $1,114.34, and you would pay $201,161.76 in interest.

Getting the very best interest rate that you can will significantly decrease the amount you pay each month, as well as the total amount you pay over the life of the loan.

Loan Term

A 30-year fixed-rate mortgage is the most common type of mortgage. However, some loans are issues for shorter terms, such as 10, 15, 20 or 25 years. Getting a loan with a shorter term can raise your monthly payment, but it can decrease the total amount you pay over the life of the loan. For example, for that same $200,000 house with a 4.33 percent interest rate, your monthly payment for a 15-year loan would be $1,512.67, but you would only pay $72,280.12 in interest. You would also pay off your loan in half the time, freeing up considerable resources.

Private Mortgage Insurance

Unless you come up with a 20 percent down payment or get a second mortgage loan, you will likely have to pay for private mortgage insurance. PMI protects the lender in case you default on the loan. The cost of PMI varies greatly, depending on the provider and the cost of your home. However, you could pay as much as a couple hundred dollars each month for PMI, in addition to your principle and interest.

Property Taxes

Most lenders allow you to pay for your yearly property taxes when you make your monthly mortgage payment. Some may even require it. Your estimated yearly payment is broken down into a monthly amount, which is stored in an escrow account. Your lender then pays your taxes on your behalf at the end of the year. The amount may fluctuate if your county or city raises the tax rate or if your home is reevaluated and increases in value.

Property Insurance

Just like you have to carry insurance for your car, you have to carry insurance for your home. This protects you and the lender in case of a fire or other catastrophic accident. Most lenders allow you to include your property insurance in your monthly mortgage payment. Just like with PMI, the monthly amount is put into an escrow account, and the bill is paid on your behalf.

HOA Fees

Some homes especially condominiums and town homes are part of a housing community that includes a community pool, fitness center and other amenities, such as lawn care. If you buy a home in such a community, you will have to pay homeowner’s association fees. The amount depends on the community in which you live, but the fees can be $100 to $200 per month.

Using the above calculator can help you put together all of these complex variables to get a clear picture of your monthly mortgage payment so you know exactly how much to expect.

Money Saving Tip

How much money could you save? Lock in low rates today


Mortgage Marvel Rate Trends Shows 30-Year Fixed Rates Fell in April #mortgage #bad #credit


#mortgage marvel

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Mortgage Marvel Rate Trends Shows 30-Year Fixed Rates Fell in April

MEQUON, WI–(Marketwire -05/02/12)- Mortgage Marvel Rate Trends™, a daily survey of more than 1,000 lenders, shows conforming, 30-year, fixed rates fell in April, closing out the month at 3.96 percent. Late in the month, the economic news from Europe continued to be negative, which led investors to seek the safety of U.S. Treasury notes. Increased buying drives down interest rates on these notes, and mortgage rates track these rates closely. This is clearly good news for those looking to buy or refinance a home.

“Most economists are indicating that rates will continue to stay low,” said Rick Allen, chief operating officer of Mortgage Marvel. “The housing market is warming up and mortgage interest rates are staying low, which runs counter to most expectations. Consumers should consider acting now if they are looking to refinance a mortgage or purchase a home.”

30-Year Fixed Rate – As of April 30, 2012

The 30-year fixed rate on April 30 was 0.31 percent lower than the 6-month high of 4.27 percent reached on Oct. 30, 2011.

30-Year Fixed Rate – Highs Lows

*Change based on difference from current rate

Other popular products

Fifteen-year fixed rates also headed lower in April, closing out the month at 3.2 percent after reaching a high of 3.35 percent on April 4. 5/1 ARMs fell as well to 3.18 percent on April 30 after hitting a high of 3.33 percent on April 2. The rates for 30-year, fixed rate jumbo loans (typically loans over $417,000) closed the month at 4.74 percent after reaching a high of 5.02 percent on April 5.

For comparison sake, displayed rates feature 0 discount points unless otherwise indicated. The assumed loan amount and loan-to-value ratio are $500,000 and 66% for jumbo loans and $187,500 and 75% for all other programs.

For more detailed information, including an interactive graph and state-level detail, go to www.mortgagemarvel.com/mortgageratetrends/ .

About Mortgage Marvel Rate Trends

Mortgage Marvel Rate Trends pulls rates every day directly from the live product and pricing database of more than 1,000 national, regional, and local banks and credit unions across the country. Mortgage Marvel Rate Trends includes average rates for conforming (i.e. loans below $417,000) and jumbo loan programs across all common fixed and adjustable rate products. Mortgage Marvel Rate Trends also separately tracks rates for purchase, rate term refinance, and cash-out refinance transactions for every product and program, and for every state and region in the U.S.

About Mortgage Marvel and Mortgagebot

Mortgage Marvel (www.MortgageMarvel.com ) presents free, accurate, up-to-date mortgage quotes from multiple lenders in an easy-to-understand display. It further enables borrowers to link directly to their preferred lender — where they can complete a mortgage application and get approved with full disclosures, all in about 20 minutes or less.

Mortgage Marvel is operated by Mortgagebot LLC (www.Mortgagebot.com ), the industry-leading, Inc. 5000 company that provides the unique, award-winning PowerSite family of integrated point-of-sale (IPOS) solutions. Mortgagebot blends deep mortgage experience with innovative “cloud-computing” technology to create scalable and affordable Web sites for nearly 1,000 banks and credit unions nationwide.


30-Year Fixed Rate Mortgage Average in the United States© – FRED – St #homeloans


#50 year mortgage

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30-Year Fixed Rate Mortgage Average in the United States© (MORTGAGE30US)

(a) 30-Year Fixed Rate Mortgage Average in the United States©. Percent, Not Seasonally Adjusted (MORTGAGE30US)

Data is provided “as is,” by Freddie Mac® with no warranties of any kind, express or implied, including, but not limited to, warranties of accuracy or implied warranties of merchantability or fitness for a particular purpose. Use of the data is at the user’s sole risk. In no event will Freddie Mac be liable for any damages arising out of or related to the data, including, but not limited to direct, indirect, incidental, special, consequential, or punitive damages, whether under a contract, tort, or any other theory of liability, even if Freddie Mac is aware of the possibility of such damages.

Copyright, 2016, Freddie Mac. Reprinted with permission.

Select a date that will equal 100 for your custom index:

U.S. recession: or Enter date as YYYY-MM-DD

Display integer periods instead of dates (e.g. -1,0,1. ) with the value scaled to 100 at period 0.

Integer start/end to Copy to all

Release: Primary Mortgage Market Survey

Notes:

Data is provided “as is,” by Freddie Mac® with no warranties of any kind, express or implied, including, but not limited to, warranties of accuracy or implied warranties of merchantability or fitness for a particular purpose. Use of the data is at the user’s sole risk. In no event will Freddie Mac be liable for any damages arising out of or related to the data, including, but not limited to direct, indirect, incidental, special, consequential, or punitive damages, whether under a contract, tort, or any other theory of liability, even if Freddie Mac is aware of the possibility of such damages.

Copyright, 2016, Freddie Mac. Reprinted with permission.

Suggested Citation:

Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States© [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MORTGAGE30US, September 18, 2016.

Related Resources

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30-Year Fixed Rate Mortgage Average in the United States©


Mortgage Marvel Rate Trends Shows 30-Year Fixed Rates Fell in April #mortgage #affordability #calculator


#mortgage marvel

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Mortgage Marvel Rate Trends Shows 30-Year Fixed Rates Fell in April

MEQUON, WI–(Marketwire -05/02/12)- Mortgage Marvel Rate Trends™, a daily survey of more than 1,000 lenders, shows conforming, 30-year, fixed rates fell in April, closing out the month at 3.96 percent. Late in the month, the economic news from Europe continued to be negative, which led investors to seek the safety of U.S. Treasury notes. Increased buying drives down interest rates on these notes, and mortgage rates track these rates closely. This is clearly good news for those looking to buy or refinance a home.

“Most economists are indicating that rates will continue to stay low,” said Rick Allen, chief operating officer of Mortgage Marvel. “The housing market is warming up and mortgage interest rates are staying low, which runs counter to most expectations. Consumers should consider acting now if they are looking to refinance a mortgage or purchase a home.”

30-Year Fixed Rate – As of April 30, 2012

The 30-year fixed rate on April 30 was 0.31 percent lower than the 6-month high of 4.27 percent reached on Oct. 30, 2011.

30-Year Fixed Rate – Highs Lows

*Change based on difference from current rate

Other popular products

Fifteen-year fixed rates also headed lower in April, closing out the month at 3.2 percent after reaching a high of 3.35 percent on April 4. 5/1 ARMs fell as well to 3.18 percent on April 30 after hitting a high of 3.33 percent on April 2. The rates for 30-year, fixed rate jumbo loans (typically loans over $417,000) closed the month at 4.74 percent after reaching a high of 5.02 percent on April 5.

For comparison sake, displayed rates feature 0 discount points unless otherwise indicated. The assumed loan amount and loan-to-value ratio are $500,000 and 66% for jumbo loans and $187,500 and 75% for all other programs.

For more detailed information, including an interactive graph and state-level detail, go to www.mortgagemarvel.com/mortgageratetrends/ .

About Mortgage Marvel Rate Trends

Mortgage Marvel Rate Trends pulls rates every day directly from the live product and pricing database of more than 1,000 national, regional, and local banks and credit unions across the country. Mortgage Marvel Rate Trends includes average rates for conforming (i.e. loans below $417,000) and jumbo loan programs across all common fixed and adjustable rate products. Mortgage Marvel Rate Trends also separately tracks rates for purchase, rate term refinance, and cash-out refinance transactions for every product and program, and for every state and region in the U.S.

About Mortgage Marvel and Mortgagebot

Mortgage Marvel (www.MortgageMarvel.com ) presents free, accurate, up-to-date mortgage quotes from multiple lenders in an easy-to-understand display. It further enables borrowers to link directly to their preferred lender — where they can complete a mortgage application and get approved with full disclosures, all in about 20 minutes or less.

Mortgage Marvel is operated by Mortgagebot LLC (www.Mortgagebot.com ), the industry-leading, Inc. 5000 company that provides the unique, award-winning PowerSite family of integrated point-of-sale (IPOS) solutions. Mortgagebot blends deep mortgage experience with innovative “cloud-computing” technology to create scalable and affordable Web sites for nearly 1,000 banks and credit unions nationwide.


Average US 30-year mortgage rate falls to new 2016 lows #fha #mortgage


#30 year mortgage rate

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Average US 30-year mortgage rate falls to new 2016 lows Associated Press Thursday, July 7, 2016
PAUL WISEMAN

WASHINGTON (AP) — Long-term U.S. mortgage rates fell this week to the lowest level since May 2013, driven down by financial tumult in Europe.

Mortgage giant Freddie Mac says the average 30-year fixed rate mortgage fell to 3.41 percent from 3.48 percent a week ago. A year ago, the 30-year rate stood at 4.04 percent. The 15-year mortgage rate dropped to 2.74 percent, down from 2.78 percent last week and 3.20 percent a year ago.

After Britain’s recent vote to leave the European Union, worried investors fled to the safety of U.S. Treasury bonds. Long-term mortgage rates tend to track the yield on 10-year Treasury notes, which fell to 1.37 percent Wednesday from 1.75 percent before the Brexit vote.

The 30-year fixed rate is now close to its all-time low of 3.31 percent in November 2012.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage remained at 0.5 point this week. The fee for a 15-year loan was unchanged at 0.4 point.

Rates on adjustable five-year mortgages averaged 2.68 percent this week, down from 2.70 percent last week. The fee remained at 0.5 percent.


Average 30-year mortgage rate falls to % #adjustable #rate #mortgage


#30 mortgage rates

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Average 30-year mortgage rate falls to 3.62%

The Associated Press | Feb 25, 2016

WASHINGTON – Average long-term U.S. mortgage rates fell this week as anxiety over the global economy persisted. Long-term rates resumed their decline after being unchanged last week following six straight weeks of easing.

Mortgage buyer Freddie Mac said Thursday the average rate on a 30-year, fixed-rate mortgage slipped to 3.62% from 3.65% last week. That puts it well below the 3.80% it marked a year ago.

That was the lowest level for a 30-year fixed rate since early February of last year.

The average rate on 15-year fixed-rate mortgages declined to 2.93% from 2.95% last week.

Mortgage rates have continued to fall despite the Federal Reserve’s decision in December to raise the short-term rate it controls for the first time since 2006.

Global economic worries and turbulence in world stock markets have pushed up prices of U.S. government bonds as investors seek safety. That has depressed the yields on the bonds, which mortgage rates follow. The yield on the 10-year Treasury bond has dropped to strikingly low levels below the significant 2% mark.

The benchmark yield stood at 1.75% Wednesday, down from 1.81% a week earlier. The yield fell further to 1.70% Thursday morning. That compares with 2.27% before the Fed’s rate hike on Dec. 16.

Despite the decline in mortgage rates this year, new government data show that Americans stepped back from buying new homes in January, as purchases plunged sharply in western states where prices are typically higher.

The Commerce Department said Wednesday that new-home sales fell 9.2% last month to a seasonally-adjusted annual rate of 494,000. Most of the decline stemmed for a 32.1 drop in sales in the West. Sales also slipped in the Midwest, while edging up in the Northeast and South.

Continue reading below

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5 chains joining Starbucks in pumpkin spice craze

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What disability benefits mean for your spouse s Social Security

Hidden gems if you want to retire overseas


Comparison of a 30-Year vs #mortgage #rate #calculator


#15 year fixed mortgage rates

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Comparison of a 30-Year vs. a 15-Year Mortgage

A bewildering variety of mortgages is available, but for most homebuyers there is, in practice, only one.

The 30-year-fixed mortgage is practically an American archetype, the apple pie of financial instruments. It is the path that generations of Americans have taken to first-time home ownership. According to the Mortgage Bankers Association, 86% of people applying for purchase mortgages in February 2015 opted for 30-year loans.

But many of those buyers might have been better served if they had opted instead for a 15-year fixed-rate mortgage ; the 30-year’s younger, and less popular, sibling. The loans are structurally similar – the main difference is the term. (See also, A Guide to Buying a House in the U.S. )

A shorter-term loan means a higher monthly payment, which makes the 15-year mortgage seem less affordable. But, in fact, the shorter term actually makes the loan cheaper on several fronts – over the full life of a loan, a 30-year-mortgage will end up costing more than double the 15-year option.

How the Term Affects the Cost

The main driver of higher costs is time. A mortgage is simply a particular kind of term loan – one secured by real property – and in a term loan, the borrower pays interest calculated on an annual basis against the outstanding balance of the loan. Both the interest rate and monthly payment are fixed.

Because the monthly payment is fixed, the portion going to pay interest and the portion going to pay principal change over time. At the beginning, because the loan balance is so high, most of the payment is interest. But as the balances gets smaller, the interest share of the payment also declines, and the share going to principal increases. (For further explanations, see Investopedia’s tutorial Mortgage Basics .)

In a 30-year-loan, of course, that balance shrinks much more slowly – effectively, you’re renting the same amount of money for more than twice as long. (It’s more than twice as long, rather than just twice as long, because in a 30-year mortgage, the principal balance does not decline at as fast a rate as in a 15-year loan.) When the interest rate is 4%, a borrower actually pays almost 2.2 times more interest to borrow the same amount of principal over 30 years compared to a 15-year loan.

Differences in Interest Rates

Moreover, because 15-year loans are less risky for banks than 30-year loans, and because it costs banks less to make shorter-term loans than longer-term loans, consumers pay a lower interest rate on a 15-year mortgage – anywhere from a quarter of a percent to a full percent (or point) less. And the government-supported agencies that finance most mortgages impose additional fees, called loan level price adjustments, which make 30-year mortgages more expensive.

Fannie Mae and Freddie Mac charge price adjustments to borrowers who have lower credit scores or are putting down less money.

“Some of the loan level price adjustments that exist on a 30-year do not exist on a 15-year,” says James Morin, senior vice president of retail lending at Norcom Mortgage in Avon, Conn. Most people, according to Morin, roll those fees into their mortgage for a higher rate rather than paying them outright.

Imagine, then, a $300,000 loan, available at 4% for 30 years or at 3.25% for 15 years. The combined effect of the faster amortization and the lower interest rate means that borrowing the money for just 15 years would cost $79,441, compared to $215,609 over 30 years, or nearly two-thirds less.

The rub, of course, is the monthly payment. The price for saving so much money over the long run is a much higher monthly outlay: The payment on our hypothetical 15-year loan is $2,108, or nearly 50% more than the monthly payment for the 30-year loan ($1,432).

If You’re About to Retire

If you can afford the higher payment, it is in your interest to go with the shorter loan, especially if you are approaching retirement when you will be dependent on a fixed income.

For some experts, being able to afford the higher payment includes having a rainy day fund tucked away – according to Bob Walters, chief economist for Quicken Loans, your liquid savings should amount to at least a year’s worth of income. What financial planners like about the 15-year mortgage is that it is effectively “forced saving,” in the form of equity in an asset that normally appreciates. (Although like other equities, homes rise and fall in value.)

Weighing College and Retirement Savings Goals

There are some instances where a borrower may have incentives to save and invest that money elsewhere, as in a 529 account for college tuition or a 401(k) retirement account, where an employer matches the borrower’s contributions. And with mortgage rates so low, a borrower could, in theory, choose to borrow with a 30-year note, and invest the difference between that lower monthly payment and the higher amount he or she would have paid each month on the 15-year mortgage.

For example, in the previous example a 15-year loan monthly payment was $2,108 and the 30-year loan monthly payment was $1,432. A borrower could invest the $676 difference elsewhere.

The back-of-the-envelope calculation is how much (or whether) the return on the outside investment, less the capital gains tax you owe on it, exceeds the interest rate on the mortgage, after accounting for the mortgage interest deduction. (For someone in the 25% tax bracket, the deduction might reduce the effective mortgage interest rate from, say, 4% to 3%.)

This gambit, however, demands a propensity for risk, according to Shashin Shah, a certified financial planner in Dallas, because the borrower will have to invest in volatile stocks.

“Currently there’s no fixed-income investments that would yield a high enough return to make this work,” says Shah. It also requires the discipline to systematically invest the equivalent of those monthly differentials and the time to focus on the investments, which, says Shah, most people lack.

(For more on the special considerations of getting a mortgage at various life stages, see Getting A Mortgage In Your 20s and Getting A Mortgage In Your 50s .)

A Best-of-Both-Worlds Option?

Most borrowers evidently also lack – or at least think they lack – the wherewithal to make the higher payments required by a 15-year mortgage. But there is a simple solution for 30-year borrowers to capture much of the savings of the shorter mortgage: Simply make the larger payments of a 15-year schedule on your 30-year mortgage, assuming the mortgage has no prepayment penalty.

You are entitled to direct the extra payments to principal, and if you make the payments consistently, you will pay the mortgage off in 15 years. If times get tight, you can always fall back to the normal, lower payments of the 30-year schedule.

The Bottom Line

Many buyers would be well served if they opted for a 15-year fixed-rate mortgage instead of a 30-year mortgage. A lower interest rate and shorter term mean that you will pay considerably less for your loan.

And as Shah says: “There’s not a single client that we have who’s paid off their house that has ever felt bad about it.” The rub is the higher monthly payment, and it is sensible to weigh the value of a less costly mortgage against other savings priorities like college, retirement and a rainy-day fund.

(You may also be interested in reading 6 Tips To Get Approved For A Mortgage and Mortgages: How Much Can You Afford? )

A Securities and Exchange Commission rule that sets the conditions under which restricted, unregistered and control securities.

A type of tax credit available to students of a post-secondary educational institution, such as a college or university.

The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price.

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Social finance typically refers to investments made in social enterprises including charitable organizations and some cooperatives.

Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional.

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