Welcome Home San Diego County

15 Year Mortgage Becoming Attractive to Many Homeowners

MORTGAGE NEWS

A growing number of homeowners looking to refinance are finding the 15 year mortgage appealing instead of the traditional 30 year term.

Recent data according to the Mortgage Bankers Association reveals one in five applications during October 2009 were for the 15 year term, up 9.1% from a year ago.

The attraction of this mortgage is because interest rates have dropped to near historical lows. Mid December rates for a 15 year fixed conforming mortgage averaged 4.46%, well below the recent high of 5.25% in mid June. Rates on 30 year fixed-rate conforming loans averaged 4.99% or about half a percent point higher.

15 year home mortgages can have their disadvantages, even with low rates monthly payments can be much higher as the loan is being paid off over a shorter term.

Originations of 15 year mortgages at Wells Fargo & Co. are up 55% through November from a year earlier. At J.P. Morgan Chase & Co., 15 year loans now account for 20% of refinances, up from 10% a year ago.

Many homeowners who have paid down a substantial part of their home loan seem to think it makes sense to refinance to a shorter term and pay the difference than put that money in the bank or invest in the stock market and feel lucky if they make 1% interest!

For example – a homeowner in long beach, Calif is in the process of refinancing his investment property to a 15 year loan which carries a rate of 4.375%, this will raise his monthly payment to $294. He states my loan will be paid down quicker – its a win win situation.

Pam Parton 760-580-1615                  Joanna Woolley 760-580-1630

content courtesy of the Wall Street Journal by Ruth Simon.