Getting a New Mortgage Smart, These Days


The latest report from Freddie Mac suggests that home interest rates are on the decline again, which is good news for homeowners who are thinking about getting a new mortgage.

According to the federally-run corporation’s most recent Primary Mortgage Market Survey (PMMS), 30-year rate averages dipped below 4 percent to 3.99, while 15-year rates averaged out at 3.23 percent. Last week, reports estimated averages for 30-year loans at 4.08 percent, with 15-year plans at 3.30 percent.

Why Rates Slipped

According to Freddie Mac VP Frank Nothaft, interest rates slipped lower this week, thanks to weak economic indicators and declining home sales. Last week, rates jumped on the heels of an optimistic employment report, which caused U.S. Treasury bond yields to move upward; however, the gains were quickly erased in only seven days’ time.

What it Means for Homeowners

Low rates are generally good news for people who plan on getting a new mortgage, provided they have enough equity to fund a new loan. Unfortunately, declining property values have made it difficult for many Americans to refinance their home loans. On the other hand, if you do have enough equity; now is an ideal time to save money by shortening or lengthening your loan.

For instance, if you are currently paying on a 30-year plan, you can save thousands of dollars in interest charges by shortening to a 15-year option based on low current rates. This is a great plan for seniors who don’t want to carry a mortgage into their retirement, as well as ordinary homeowners, who don’t want to waste cash paying interest fees.

On the other hand, if you are currently struggling to handle a 15-year plan, you can free up cash for other expenses by switching to a 30-year refi option. Current rates are so low; you’ll enjoy much smaller monthly payments, which can take a lot of stress off families who are in financial distress.

Things to Consider

Although Freddie Mac reports low national rates, it bases its assessment on good-faith estimates from only a few lenders scattered about the country. Rates in your area may vary depending on the local economy and housing situation. The same can be said of property values, which remain high in many communities, despite low national averages. Finally, before getting a new mortgage, it’s important to consider any applicable fees and deduct this expense from your overall savings. Obviously, it won’t do any good to lower your monthly payment if high fees will offset your net savings.

By Nathaniel Hutchinson (29 Posts)

Nathaniel Hutchinson is's Business and Financial Expert .

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