Factors To Consider When It Comes To Your Mortgage


Barry Habib, Chairman of Mortgage Success Source, discussed how home loan rates may well buck the phrase, “March comes in like a lion and out like a lamb” due to the Federal Reserve ending its Mortgage Backed Securities (MBS) purchase program on March 31st. And the last week full week of March did in fact feel the “roar of the lion” as in two days, interest rates increased sharply following financial uncertainty and action within the bond markets.

With uncertainty surrounding the months ahead in the mortgage arena, here is some information to help you put things into perspective.

First Things First
Mortgage rates did rebound a bit from the highs set in March, but one thing was left clear for all watching mortgage and interest rates overall. Volatility and spikes in rates can occur anytime, be it in the U.S. economic arena or the world.

That being said, everyone wants to get the best rate for their mortgage. When the last interest rate wave came across the land in 2003, happy homeowners couldn’t wait to brag that they received an interest rate below 5.50% for a 30 Year Fixed, which was then the lowest rate we had ever seen. We are still well below that level.

Would $1 a Day Keep You from Your Dream Home?
Even though 30 year fixed rates starting with the number “4” with no points may be out of reach, a great rate can still be obtained. The other thing to take into consideration is that with a mortgage amount of $200,000, the difference between a rate of 5.00% and 5.375% for a 30 year fixed rate is $46 a month.

While no one wants to pay more for their mortgage than they have to, most people would agree that $46 a month is typically not enough to prevent them from buying the home of their dreams. After all, $46 a month is less than the cost of one tank of gasoline for many people. Combined with the after tax benefits of deducting the interest on a mortgage payment, for many families we are talking approximately $1 a day.

Lower Payment vs. Lower Rate of Interest
With interest rates at phenomenally low levels, an argument can certainly be made for people considering a mortgage for a shorter term. The 15 year fixed rate mortgage is one loan often considered.

Through the first twelve weeks of this year, 15 year fixed rates according to Freddie Mac have averaged a better rate of just over .50% as compared to a 30 year fixed. The greatest benefit of choosing a shorter term is knowing that the mortgage will have a zero balance in 15 years, saving the borrower over $110,000 in interest payments over 30 years.

However, the lower rate and shorter term do come at a monthly cost for borrowers. The difference in monthly payment for a 30 year fixed at 5.00% and a 15 year fixed at 4.50% is $477 a month higher for the 15 year fixed. And in these tough economic times, “cash is king.” That is, “cash on hand” is king.

Many people would be better served having a smaller mortgage payment under a 30 year fixed, and then saving or investing the extra money. Note, saving and investing rather than spending the extra money is the key point here. In particular, people who find themselves without a job or who have a pressing financial need would benefit from being able to access these saved funds.

Other Options
While adjustable rate mortgages (ARMs) were touted as a contributor to the mortgage melt down, perspective in this arena is warranted as well. In viewing ARMs as an alternative, the most important thing to consider is how long someone intends to have the mortgage in place.

Many industry experts state the average time a mortgage is in place is seven years. Seven years is a long time. People move to different homes, relocate for employment reasons, and see their children get older, go off to college, or move out completely. It’s important to consider these types of factors when selecting a mortgage.

According to Freddie Mac, over the last twelve weeks, the interest rate for a 30 year fixed has been just north of .75% higher than that of a 5/1 ARM (where the interest rate would be fixed for 60 months before incurring an adjustment). If you know that you may be moving either before the interest rate is subject to change or shortly thereafter, that .75% would save approximately $90 a month in the same $200,000 example above.

For those looking for a little more security, a 7/1 ARM (meaning the interest rate would be locked for 84 months before incurring an adjustment), offers an interest rate that is nominally higher than a 5/1 ARM (perhaps .125-.25% in interest) but still quite a bit below that of a 30 year fixed rate.

For people who expect to have shorter time frames for their mortgage, these two loans offers a fantastic rate while still assuring that the monthly interest rate and payment will not change for a specified period.

Best Path for all Prospective Borrowers
Whether you are looking to refinance or buy a home, attractive options remain for anyone seeking a mortgage today. However, as an individual or family’s mortgage payment is often their largest monthly payment, obtaining proper advice is paramount to making the best decision.

Be Sociable, Share!


  1. Really interesting article post. Your post is really interesting. I liked this blog post. This blog post is excellent! I have to say that after continually reading awful as in, same old ideas, little quality content, etc. blog posts on other sites, it’s good to actually read something that has some thought put into it. It’s a pleasure to read good article posts, especially after continually seeing rehashed crap that writers and bloggers are putting out nowadays. It’s always nice when I come across content that actually has value, I’ve been seeing a ton of subpar writing attempts lately. Anyhow, thanks again and I’ll check back often to see what else you have to offer. I’ll check back in the future to see what else you have up your sleeve. Keep up the wonderful work! BTW, I like your site design, but your header image was only loading half way for me. P.S. Your header is messed up a bit in IE. The problem could be on my end but I thought you might want to look into that.

  2. i love this post. i have alerted my pal harry about this because he likes this kind of information as well!

  3. We are a group of volunteers and starting a new initiative in a community. Your blog provided us valuable information to work on.You have done a marvellous job!

  4. WOW Great blog post here, really good info! I enjoyed reading your post (even read it twice) and I really hope to read more of your posts in the future, so I’ve bookmarked your blog. But I couldn’t just bookmark it, oh no.. When I see quality blogs like this one, I like to share it with the world! So I’ve created a backlink to your site (from my website, and don’t worry it’s do-follow) you can see it here: http://www.Malepenisenlargementpills.com/siteswelike.php Anyways I hope you keep up the good work and I’ll see you soon my friend!

  5. We are a group of volunteers and starting a new initiative in a community. Your blog provided us valuable information to work on.You have done a great job!

Leave a Reply