Not since 2001 have mortgage rates spreads been as narrow as they are today.  The yield curve is starting to look more like a yield ledge.

As of today, rates on 30-year fixed rate mortgages are pricing just 0.375% higher than for a 3-Year ARM. 

That has tremendous significance to home buyers and homeowners alike.

For example, one question that helps to define an individual's mortgage planning strategy is: "How long do you plan to stay in this home?".  The more narrow the spread is, though, the less relevant this question becomes.

When the spread between a 30-year fixed and a 3-year ARM is as small as it is today, there is not much payment difference between the two (given an equivalent amortization schedule).

To put math on this:

• A $300,000, 3-year amortizing ARM carries a monthly cost of $1633.46
• A $300,000, 30-year amortizing FRM carries a monthly cost of $1703.37. 

For just $70 more per month, a homeowner can lock in a steady rate and a constant payment for the long haul.

But, because the 30-year fixed carries a higher mortgage rate, it also creates a larger tax benefit.  Assuming a 28% tax bracket, that added bonus is $26 monthly.  Therefore, the post-tax cost of choosing the 30-year fixed rate mortgage is $44.

If you liked it at $70, you have to love it at $44.

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.