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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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Fixed mortgage rates firmed up a little this week, landing in the middle of where they've wandered over the last four weeks.

As reported by Freddie Mac, the average offered rate for a conforming 30-year FRM increased three basis points (0.03%), edging up to 2.90 percent. Fifteen-year FRMs kicked a little higher, posting an increase of five basis points (0.05%) to tick up to 2.40 percent. Hybrid 5/1 ARMs continue to be erratic, with the initial fixed interest rate for the first five years decreasing by six one hundredths of a percentage point and returning to a recent low point of 2.90 percent for the week. The ARM market is starting to change, as LIBOR-based ARMs are being phased out and lenders probably aren't yet comfortable with SOFR-based product, which will be the new standard in the market by next year.

With mortgage rates low, home sales have been well supported as the summer came to a close. Existing home sales increased by 2.4% in August to a 6 million annualized rate of sale, but tight inventories of homes for sale continue to pressure home prices upward, with the median price of a home sold this year 11.4% above last August. Sales of new homes increased by 4.8% in August, rising to a 1.011 million annual rate, the highest annual figure since September 2006. Some of these gains are a result of shifted demand from the spring shutdown, but some are also due to COVID-19 effects as work-from-home and getting out of congested urban areas have added new dimensions to the housing market this year.

Mortgage rates remain on a level plane at the moment.

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
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%
07/30 2.990% 2.510% 2.940%
07/23 3.010% 2.540% 3.090%
07/16 2.980% 2.480% 3.060%
07/09 3.030% 2.510% 3.020%

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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