Hot July mortgage rates show no signs of cooling

Photo: NCinDC

We started 2012 with record-low mortgage rates, and home financing has only gotten cheaper.

 But just how far have interest rates fallen during the first six months of the year?

Find out in my article,  Hot July mortgage rates show no signs of cooling.

 You'll also learn how much you could save by taking out a 15 year mortgage instead of a 30 year mortgage--an option that might be within reach with rates so low.

These shorter-term mortgages are less expensive because lenders and mortgage investors consider them less risky.
The lower rate means that when you cut your loan term in half, your monthly payment won’t double.

Mike Davidson, a senior executive in the New York City area, says he’s held both 30- and 15-year mortgages.
“Earlier in my life, I always took out the 30, since it had a smaller monthly payment and I was just getting started. I didn't focus on total costs, just the monthly nut and how it compared to my salary,” he says.
“However, the last few times I've refinanced I have preferred the 15-year option,” he says, because the total overall cost is much lower.
“Here's the real deal sealer. With a 15-year mortgage I will be in a position to have this mortgage paid off just about the time my two children are entering college,” he says.
Christopher Davis, director of communications and retirement services for HFM Wealth Management in Hartford, Conn., provides the following example:For someone borrowing $300,000 for 30 years at a fixed rate of 3.375%, the estimated monthly principal and interest payment would be $1326. For a 15-year fixed rate mortgage, the interest rate would drop to about 2.75%, making the monthly payment $2035. 
Assuming the borrower could afford $2035 per month, he or she could choose the 30-year option but make additional monthly principal payments of $700 and pay off the mortgage in about 16 years.
“In exchange for the possibility of one more year of debt service, the borrower gains the flexibility of being able to reduce their payment, to as low as $1326 in this example, if they become cash-strapped during any period,” Davis says.

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