Current mortgage rates are dropping.
Since the start of 2014, mortgage rates of all types have been on steady decline. Conventional 30-year fixed rates loans have dropped approximately 87.5 basis points (0.875%) and 15-year fixed-rate loans have dropped close to 60 basis points (0.60%).
Mortgage rates for refinances are near an all-time low and with millions of U.S. homeowners in the money to refinance, there is ample opportunity to take advantage of today's low rates.
"In the money" means that your current mortgage rate is more than 150 basis points (1.50%) above the current market rate; and you have a balance of $50,000 with at least 10 years remaining on your loan.
The typical refinancing household now saves more than 30% on their home loan annually.
With current mortgage rates lows, U.S. refinance behaviors are affected.
Last quarter, 38% of refinancing households refinanced to get rid of their existing 30-year fixed rate loan; instead, choosing a loan of shorter-term including the 15-year fixed-rate loan, or the 20-year fixed-rate loan.
This rate of exodus remains among the highest in recorded history.
Low interest rates are a catalyst.
As a result of today's mortgage rates, homeowners who refinance from a 30-year loan to a 15-year end up paying 65% less mortgage interest over time; and, many are getting access to the lowest APR and rates of their lifetime.
It's an excellent time to refinance to a shorter-termed loan.
According to Freddie Mac's quarterly Product Transition report, between January - March 2015, nearly two-in-five refinancing households with an existing 30-year fixed-rate mortgage chose to abandon that product, refinancing into a 15-year or 20-year fixed rate loan instead.
The rush to get rid of 30-year loans is a sensible one. 15-year rates are downright cheap right now; and many homeowners like the idea of paying off their homes 15-year faster.
Plus, as compared to recent history, the spoils for choosing a 15-year loan are huge.
Consider that during the 12-year period between 2000-2012, mortgage rates for a 15-year fixed rate loan were 52 basis points (0.52%) below a comparable 30-year loan.
By comparison, 15-year rates were 70 basis points (0.70%) cheaper through the first three months of 2015.
Savvy homeowners see opportunity.
At today's rates, 15-year mortgages require homeowners to pay 65% less mortgage interest over the life of a loan as compared to a 30-year product. On a $350,000 loan, that's equal to savings of $170,000; money which can be used for funding a retirement, paying for college(s), or for any other imaginable purpose.
Never in history have savings like this been possible.
The 15-year mortgage has been especially popular among users of the Home Affordable Refinance Program (HARP). HARP is the government's mortgage program for underwater homeowners.
Sometimes called "The Obama Refi", the HARP refinance gives homeowners whose homes have lost equity the ability to refinance without taking on new private mortgage insurance (PMI) coverage.
Via HARP, homeowners who had put 20% down at the time of purchase are able to refinance with no PMI required, regardless of their current LTV. Homeowners who had put 10% down are able to refinance without an increase to their existing PMI coverage.
HARP gives homeowners access to today's low mortgage rates and there are an estimated 622,000 U.S. households eligible for a HARP 2 refinance.
Maybe your home is one of them.
Regardless of your property's current value, you may be eligible to refinance. More than 3.3 million U.S. homeowners have used the HARP program already.
For homeowners refinancing from a 30-year fixed rate mortgage into another 30-year fixed, today's HARP refinances result in a 30% drop or more on monthly payments. For homes with larger loan sizes, savings amounts to thousands of dollars per year.
Among HARP households, though, it's been popular to switch from 30-year loans into something shorter. The more equity that a homeowner has in its home, data shows, the more likely that homeowner will refinance into a 15- or 20-year loan term.
Here's how HARP homeowners refinanced in February, based on their existing home loan-to-value.
Mortgage rates remain low for all loan types, however.
According to Freddie Mac's weekly Primary Mortgage Market Survey (PMMS), 30- and 15-year fixed rate mortgage rates are near their lowest levels of the year; and within striking distance of the lowest rates of all-time, set in May 2013.
15-year mortgages remain popular and "on sale". See how much money you can save with a refinance to lower rates. The amount of interest you'll save long-term may be monstrous.
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The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2015 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)