15-Year Mortgages Gain Popularity With Buyers
Record-low rates are driving more borrowers to seek shorter term mortgages.
Freddie Mac reports that nearly 16 percent of the fixed-rate mortgages that lenders sold to the agency during the third quarter were comprised of 15-year mortgages. That’s up from nearly 10 percent a year ago. The data excludes mortgages for refinancing.
For refinancings, 15-year mortgages accounted for nearly a third of loans during the first seven months of this year, according to CoreLogic.
“The 30-year mortgage became the standard in lending because its lower monthly payments made real estate affordable to more Americans,” The Wall Street Journal reports. “While the 30-year remains king, the gap between the two loans’ popularity is shrinking.”
Fifteen-year fixed-rate mortgages have recently averaged 2.81 percent — compared to 5.85 percent in mid-December 2007, according to HSH.com, a mortgage information Web site.
Some refinancers are finding that by switching from a 30-year to a 15-year fixed-rate mortgage they are able to not only get big savings on the life of their mortgage but also even slightly lower monthly payments. Traditionally, refinancing into a shorter-term mortgage meant paying a heftier monthly payment. But with mortgage rates so low, some home owners are finding the monthly payment isn’t increasing and may actually be less by shortening the terms of their mortgage.