Monday, August 27, 2012

Take advantage of low mortgage rates

@Money August 27, 2012: 11:05 AM

(MONEY Magazine) -- Mortgage rates have become a broken record -- in more ways than one.
In 12 of the 13 weeks from mid-April through mid-July, long-term home loan rates matched or hit new lows, as 30-year fixed loans fell to 3.53%, their lowest level in at least 40 years. (Since the end of July, they've edged up to 3.66%.) 

Mortgages closely track Treasury yields, which have been flattened by investors seeking safety amid lackluster U.S. growth forecasts and European financial woes.
"No one expects rates to leave this range for quite a while," says Rick Allen.

Rates on five-year adjustables were even lower at 2.74% -- $90 a month cheaper than a $200,000 30-year fixed. (Those adjustables are now at 2.8%.) 

With fixed rates so low, though, adjustables make sense only if you move before the initial rate expires.

Doubt you have enough equity to refi? Under new HARP rules, you may be in luck if you are current on payments and have a pre-June 2009 mortgage held by Fannie Mae or Freddie Mac.

Rewards of a Refi
Refinancing a 1 1/2-year-old $200,000 mortgage can cut costs significantly.

Original mortgage
Interest rate: 4.84%
Monthly payment: $1,054
Total interest: $179,500
New 30-year fixed-rate
Interest rate: 3.53%
Monthly payment: $898
Total interest and extra costs: $139,800
New 15-year fixed-rate
Interest rate: 2.83%

Monthly payment: $1,360
Total interest and extra costs: $61,300
Notes: Refi costs include interest paid on original mortgage, closing costs amounting to 2% of loan balance (rolled into new mortgage) and 0.7 point.
Source: Freddie Mac --First Published: August 27, 2012: 6:43 AM ET

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