20-year mortgages: Getting trendy?

Here’s what you should know about these shorter-term home loans

More homeowners are taking a two-pronged approach to refinancing: lowering their interest rate and opting for a shorter-term loan. Although your monthly payments likely will rise if you refinance from a 30-year loan to a 20-year loan, historically-low interest rates have made shorter-term home loans more affordable.

Matthew Robinson, senior public-affairs specialist for the Mortgage Bankers Association, says 30-year fixed-rate mortgages are still the most popular loan term for purchase and refinance customers, but 20-year mortgages are gaining ground, especially among refinancers. They’re the third most popular loan, behind 30-year and 15-year terms.

Although the MBA does not track applications for 20-year loans, they comprise the bulk of loans in its “fixed-rate loans/other terms” category, Robinson says. The popularity of these loans, especially among refinancers, has grown enormously in the past year alone. The MBA says that “other term” loans represented more than 15% of all refinance applications in August and are up 23.25% compared to 2011. Other-term loans represented just 1.91% of purchase applications in August but increased 13.45% from August 2011.

Patricia Widerman, a senior vice president at BB&T and group mortgage manager for Washington, D.C., and several other regions, says 20-year mortgages represent about 10% of the bank’s conforming, fixed-rate loan volume this year.

Rates

Interest rates for 20-year mortgages are lower than for 30-year loans but higher than rates for 15-year mortgages.

For example, here are the mortgage rates that U.S. Bank offered on Oct. 10:

•  30-year, fixed-rate loans: 3.875%
• 20-year, fixed-rate loans: 3.75%
• 15-year fixed-rate loans: 3.125%

“Borrowers are choosing 20-year home loans over a 15-year loan because the monthly payments are lower, even with a slightly higher interest rate, simply because the loan is amortized over a longer period of time,” Widerman says. “Borrowers who are not completely comfortable with the payments on a 15-year loan can opt for a 20-year mortgage.”

Here are the monthly payments on a $250,000 mortgage for the three most-popular mortgage terms:

•  30-year mortgage at 3.875%: $1,176
• 20-year mortgage at 3.75%: $1,482
• 15-year mortgage at 3.125%: $1,742

 By Michele Lerner of HSH.com

 

Is It Time to Move Up?

Attractive interest rates and bottomed-out home prices have many homeowners wondering if now is the time to make a move. Is the climate right for purchasing that dream home? It all depends on your personal needs, finances, and of course, the state of your local housing market. Find out if now’s the time to make a move by asking yourself these questions:

• How much do you owe on your home? Many homeowners today find themselves owing more than their homes are worth. These owners should think long and hard before selling homes at a loss.
• What are your housing needs in the decade to come? Are you a new couple expecting to expand your family? Today’s market presents great deals that can facilitate you moving up to a bigger home.
• Are you nearing retirement age? While it may be appealing to buy the dream McMansion you’ve had your eye on, it’s important to remember that bigger homes require bigger maintenance, something many seniors look to avoid.

Still other families are moving up to bigger homes that have the room for multiple generations.

• Why are you buying? Is it for more space, a better school district, or to take advantage of today’s screaming deals? These can all be admirable pursuits. Are you instead buying for the status and prestige of a neighborhood? Homeownership is still a hefty responsibility, even with low interest rates and high levels of affordability. It should never be entered into lightly.
• How quickly are homes selling? Most households cannot afford to carry two mortgages, so be sure that you are able to sell your home first before buying that dream home. Talk to your local real estate agent about the current market conditions, such as how long a home is taking to sell, sale prices, etc.
• What do you need? This last question is more philosophical and may take some extra time and thought. After the 2009 recession, many consumers are asking themselves, “What do I really need?” Wants versus needs are sometimes a hard pill to swallow in a consumer-driven society, but many families are finding that they are happier with smaller homes and more family time.

There are great deals to be had in today’s market. If your family is ready, financially and emotionally, for a move up, then be sure to contact your local real estate agent for more details on the condition of your local market and for some of today’s hottest listings.

~ Carla Hill, Realty Times

 

Celebrate Seattle Restaurant Week!

Seattle Restaurant Week

Celebrate Our Culinary Scene

10 days.
Over 150 Restaurants.
3 courses for $28.

Dine out and celebrate the fall run of Seattle Restaurant Week (SRW), October 14-25, 2012 (excluding Friday, Saturday and Sunday brunch).

More than 150 local restaurants are serving up three-course dinners for just $28* and many of them are offering three-course lunches for $15*.

*(Price is per person and does not include drinks, tax or tips)

Click here for PARTICIPATING RESTAURANTS

Impact of Interest Rates

What Difference Do Interest Rates Make?

With interest rates at historically low levels, what does this mean for potential home buyers? A lot more buying power!

Here’s an example using a $100,000 loan amortized over 30 years:

Interest Rate        3.5%        4.5%          5.5%             6.5%

Mo. Payment      $449         $507           $568             $632

Total Interest      61,656      82,407        104,404        127,544

Total Paid          161,656     182,407      204,404        227,544

At 3.5%, a loan of $200,000 would have a monthly payment of $898.

At 6.5%, a loan of $150,000 would have a monthly payment of $948.

Here’s some history…