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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 in NY.
Purchase
Your loan amount is greater than the value of the property, a condition known as being "underwater".
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Today's Mortgage Rates

After weeks of considerable downward pressure, mortgage rates finally succumbed, and legged down to new record lows again this week.

Freddie Mac reported today that the average offered rate for a conforming 30-year fixed-rate mortgage shed 11 basis points (0.11%), declining to a new low of 2.88% to start August. Conforming fifteen-year FRMs saw a seven basis point decline (0.07%), moving the popular vehicle for refinancing to a new record low of 2.44%. The initial fixed interest rate for a hybrid 5/1 ARM eased by four one-hundredths of a percentage point (0.04%) to 2.90%, but with fixed rates ultra-low, very few conforming ARMs are being originated these days, anyway.

Secondary market yields for fixed rate mortgages began moving lower several weeks ago, but interest rates at the retail level remained stubborn, so consumers were not seeing the benefit. Of late, a truly awful GDP report, a Federal Reserve expecting to continue low-rate and liquidity policies well into the foreseeable future and slackening demand for mortgage credit have allowed rates to decline again. Odds favor a continued downward trend, if a gentle one, as we move into late summer.

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.

Week30-year-Fixed15-year-Fixed5-year-ARM
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%
07/02 3.070% 2.560% 3.000%
06/25 3.130% 2.590% 3.080%
06/18 3.130% 2.580% 3.090%
06/11 3.210% 2.620% 3.100%
06/04 3.180% 2.620% 3.100%
05/28 3.150% 2.620% 3.130%
05/21 3.240% 2.700% 3.170%

Mortgage Choices at a Glance

Loan type/termsFixed 30 yearsFixed 15 years/
20 Years
Hybrid ARMTraditional ARMBalloon 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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