NEW YORK (MainStreet) — With interest rates at historic lows , this may be the best time ever to buy a 15-year fixed-rate mortgage.
Homebuyers can get a 15-year fixed-rate mortgage at around 4% right now, and possibly save more than $100,000 on the total cost of the home loan, based on the current 30-year mortgage rate.
Here’s why “going 15” is such a smart move, if you act now.
According to the BankingMyWay Weekly Mortgage Rate tracker, the spread between 15- and 30-year fixed-rate mortgages is growing wider, and substantially so this week. Fifteen-year rates are at 4.261%, while interest rates on 30-year loans stand at 4.989%, a spread of 628 basis points (or 0.63%). The difference provides some serious food for thought for new homebuyers.
A few weeks ago that spread was even higher, approaching 0.8%, and took the distinction as the highest spread ever tracked by Freddie Mac (Stock Quote: FRE), which follows these sorts of things.
Mortgage rates are in decline across the board these days, although the 15-year number seems to be falling faster. Economists point to the drop in U.S. Treasury Bond rates, which seems to have been spurred by the recent Japan earthquake and a nagging sense among global investors that U.S. Treasuries aren’t the safe haven most people thought they were.
Mortgage yields are closely tied to bond yields and that’s a big reason why mortgage rates are so low, including those of 15-year, 30-year and adjustable rate mortgages.
So should you consider a 15-year mortgage? When interest rates fall that low, the monthly payments on 15-year mortgages – the chief barrier to using shorter mortgage terms – fall right alongside them. That means even lower mortgage payments, and a shorter repayment period on your home loan.