30 year mortgages have been the norm forever it seems, but these days 15 year mortgages are gaining ground! With the low interest rates, most of the time by paying just a little bit more each month you can reduce your mortgage from 30 to 15 years. According to the Mortgage Bankers Association, in November 2012, 23% of refinanced homes opted for a 15 year mortgage which is 51% more than in 2011! Back in 2007, only 8.5% of refinances were 15 years.
Why 15 rather than 30 year mortgages? You will save thousands of dollars in interest over the life of the loan as you are paying down more principal each month and in most cases the 15 year interest rate is also below that of the 30 year. A 15 year mortgage is not an option for everyone, but if you can afford it, it is worth considering!
The demand for 15 year mortgages has been soaring with the record low interest rates. Something to consider when your purchase or refinance your home is the 15 vs 30 year mortgage question. Last week, 30 year mortgages were at 3.75% and 15 year mortgages were at 2.97% – a level never seen before since the start of tracking! According to Freddie Mac, 31% of refinanced mortgages so far this year have gone with the 15 year mortgage. Back in 2002, with an interest rate of 5.5%, 35% of refinanced loans were 15 year. If you are buying or refinancing and can afford to spend several hundred dollars more a month, the 15 year mortgage at this low, low rates is really the best way to go. Check with your lender to see the options that are available to you.