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It's a question almost everyone is asking: "Should I refinance my mortgage?" If so, what's the best way to pay for my mortgage refinance

It's a question almost everyone is asking: "Should I refinance my mortgage?" If so, what's the best way to pay for my mortgage refinance

Today's Mortgage Rates

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Displaying Today's Mortgage Rates for a $200000 Purchase loan.
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Only a slight fade for mortgage rates this week, but any downward movement sets a new record low.

Freddie Mac reported today that the averaged offered rate for a conforming 30-year fixed-rate mortgage fell by just one basis point (0.01%) to 2.80%, but that was good enough for another new record low. Conforming fifteen-year FRMs dropped into new record low territory, too, with the average offered rate sliding by two basis points (0.02%) to 2.33% for the week. The initial fixed interest rate for a 5/1 hybrid ARM did manage a decline of three hundredths of a percentage point (0.03%) to 2.87%, but with fixed-rate loans so cheap, it's hard to find any consumers interested in ARMs.

Mortgage rates are mostly milling about, waiting for something to help them move in one direction or the other, be that a new fiscal stimulus bill, some clarity as to the expected election outcome, prospects for a COVID-19 vaccine or other trigger event. With none readily evident and the timing of any outcomes unclear, interest rates are likely to continue hanging around present levels in the coming days.

As has been the case, though, the key-for-mortgages yield on the 10-year Treasury has been firmer of late than it has been in months. However, secondary market purchase quotes for mortgages have been holding fairly flat. Certain risks of making and servicing mortgages has declined a bit in recent weeks, so the "risk premium" applied to mortgage pricing has diminished a bit. This has allowed mortgage rates to fall a little but even as there is some underlying upward pressure.

Record low mortgage rates (again) might be a reason to refinance. If you're not sure if a refinance works for you, why not try our Should I Refinance Calculator to see if it makes sense?

We track and discuss economic conditions that affect mortgage rates and their impact on housing markets and consumers in each week's MarketTrends newsletter. Read the most recent edition on HSH.com or subscribe for email delivery.

Week 30-year-Fixed 15-year-Fixed 5-year-ARM
10/22 2.800% 2.330% 2.870%
10/15 2.810% 2.350% 2.900%
10/08 2.870% 2.370% 2.890%
10/01 2.880% 2.360% 2.900%
09/24 2.900% 2.400% 2.900%
09/17 2.870% 2.350% 2.960%
09/10 2.860% 2.370% 3.110%
09/03 2.930% 2.420% 2.930%
08/27 2.910% 2.460% 2.910%
08/20 2.990% 2.540% 2.910%
08/13 2.960% 2.460% 2.900%
08/06 2.880% 2.440% 2.900%

Mortgage Choices at a Glance

Loan type/terms Fixed 30 years Fixed 15 years/
20 Years
Hybrid ARM Traditional ARM Balloon Mortgage
Rate changes
  • Never; Fully fixed for entire term
  • Never; Fully fixed for entire term
  • Usually after fixed period of 3, 5, 7 or 10 years
  • After that, annual change typical
  • Fully variable
  • Typically changing at one-year intervals
  • Some have shorter change intervals
  • Never; Fully fixed for entire term
Benefits
  • Low, stable payment
  • Usually easiest qualification
  • Stable payments
  • Builds equity faster
  • Lower total interest costs than 30-year term
  • Lower rates than fully fixed-rate mortgage
  • Can sometimes borrow larger loan amount for same income
  • Can have lowest interest rates
  • Qualification may not depend upon today's interest rate
  • Often has lower interest rate/monthly payment over balloon period than fixed rate
  • Similar to hybrid ARM
Drawbacks/Risks
  • Can have highest total interest cost over time
  • User may "buy" more rate stability than actually needed, increasing cost
  • Requires higher income to qualify
  • Less affordable monthly payment
  • Funds commited to payment cannot be used elsewhere
  • Stable payment for a number of years, then unpredictable
  • Rates can jump by as much as 6 percentage points at first adjustment
  • Payments fluctuate at each rate change
  • Unpredictable, rates can change as much as 2 percentage points at each adjustment
  • Loan fully due and payable when balloon period ends
  • Must be paid off or refinanced in unknown market conditions
Alternative strategy
  • Consider Hybrid ARM with appropriate fixed period
  • Consider 30-year term and prepaying loan to preserve cash-flow flexibility
  • Consider Fixed rate mortgage or longest possible fixed period, if loan hold period not known
  • Consider Hybrid ARM to ameliorate rate and payment risks for a given period
  • Consider Hybrid ARM to ensure continued loan availability
These may be useful for...
  • Purchasing a home
  • First-time homebuyers
  • Refinancing to improve cash flow/lower payment
  • Refinancing to lower total interest cost
  • Retiring mortgage more quickly
  • Building or rebuilding equity more quickly
  • Purchasing or refinancing when time horizon is seven years or shorter, and where borrower can handle increase in monthly payments
  • Purchasing or refinancing when interest rates are near top of cycle, and are likely to fall, or sale or refinance is anticipated within three years
  • Purchasing or refinancing when time horizon is three years or longer and home will be sold prior to end of balloon period
Consider if
  • Buying or refinancing a home and planning on owning for longer than 10 years
  • Buying second home
  • Refinancing to build equity
  • Paying off mortgage before life event (retirement, etc)
  • Buying a home and expect to move before fixed period ends, or know income will rise to offset payment risk, even in worst-case scenario
  • Buying or refinancing when income can handle frequent payment changes and worst-case scenario for rates over a four-year period
  • Buying a home and expect to move before balloon period ends, or have resources to pay off mortgage if refinance not available
When shopping, ask about
  • "Full cost" vs. "No cost" refinances, prepaying loan to shorten term if desired
  • If 20-year term makes payment too high, whether 25-year term is available
  • Interest rate caps, for first and subsequent adjustments, worst-case scenario
  • A history of the Index the loan is keyed off, margin and caps
  • Whether or not there is any built-in refinancing option when the balloon period ends
Useful tools & resources

Latest Mortgage Rate Analysis

HSH's longer-range outlook for mortgage rates, where we review our last forecast,discuss current market influences and provide our expectations for mortgage rates over the next nine weeks.

Mortgage Calculators

Mortgage rates and more

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