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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 Refinance loan.
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As might be expected during a holiday-shortened week, mortgage rates held mostly unchanged.

As reported by Freddie Mac, the average offered rates for both conforming 30-year fixed-rate and 15-year fixed-rate mortgages remained unchanged, holding at 2.72% and 2.28% respectively. However, the initial fixed interest rate for a Treasury-based conforming hybrid 5/1 ARM sported an outsized uptick of 31 basis points (0.31%), climbing to 3.16% for the week. This is likely a survey sample-size issue rather than any change in direction for shorter-term mortgages.

The annual updates to conforming loan limits, which are governed by changes in October-to-October home price changes will now allow borrowers to take mortgages as large as $548,250 for a single-family home. These limits can be as high as $822,375 in expensive housing markets, and expanded limits are available in 167 counties and metro areas.

The general pattern for mortgage rates remains a flat one, and 5/1 ARMs notwithstanding, mortgage rates are likely to move little over the next few days. Despite the difficult economic climate that allows them to exist, low mortgage rates are something for which to be thankful. Happy Thanksgiving!

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

Week 30-year-Fixed 15-year-Fixed 5-year-ARM
11/25 2.720% 2.280% 3.160%
11/19 2.720% 2.280% 2.850%
11/12 2.840% 2.340% 3.110%
11/05 2.780% 2.320% 2.890%
10/29 2.810% 2.320% 2.880%
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%

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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