With home loan rates hovering close to the 4% range for homeowners, many borrowers have begun approaching their banks in order to lower the terms of their borrowing length.
According to mortgage broker Freddie Mac, the first quarter of 2011 saw 34% of borrowers change their mortgage length from 30 years to 20 and 15 year rates, the highest level of mortgage length shortening in seven years, while interested buyers and refinancing parties querying home loan rates at online mortgage broker LendingTree searched for 15-year mortgage information 30% more then they did in 2010.
Showing an even more short term approach was Quicken Loans who’s new product Yourgage allows borrowers to select the term of their mortgage. The most popular term choice? Eight Short years. The second most popular option? Just 13 years.
While some financial backers argue that a 30-year-rate makes more sense at low rates since borrowers can pay less monthly and invest more in their retirement plans, that “wisdom” has largely gone out the window as borrowers attempt to pay off their mortgages at record rates, a fact that can protect them when home values are loss in down markets. Put simply, these days people don’t care about mortgage interest rate tax deductions, they simply want the security a mortgage free life brings with it.
Buyers are also realizing that lowers terms can literally save thousands, even tens of thousands of dollars in interest costs, while some borrowers who financed at historically low rates have been able to refinance at 15-year rates without raising their mortgage payments.
The advantage of lower year terms also comes down to interest rates, for example a 15-year mortgage was just 3.5% last week, which means a person with a 6% rate could actually pay less at those rates when refinancing for 15-years.