Choosing A 15-Year Fixed Rate Mortgage Over A 30-Year Fixed Rate Mortgage

It's not just 30-year fixed rate mortgages that are posting all-time lows these days. The 15-year mortgage has been plunging, too.

If you've ever considered a 15-year loan term, it's a terrific time to talk to your lender. According to Freddie Mac's weekly mortgage rate survey of roughly 125 U.S. lenders, at 3.30 percent, the 15-year fixed rate mortgage is at its lowest point in history.

The 3.30% rate doesn't come for free, however. Based on average loan term nationwide, borrowers in Minnesota choosing to "go 15" should expect to pay 0.6 discount points at closing. 1 discount point is equal to 1 percent of your loan size.

With low rates, 15-year fixed rate mortgage can be enticing; a primary benefit is the huge reduction in the long-term interest costs of your loan. The downside, though, is that monthly mortgage payments can be relatively large.

At today's mortgage rates, a 15-year fixed rate loan carries a principal + interest payment of $705.10 per $100,000 borrowed -- a 46% increase over a comparable 30-year fixed rate loan. If you can manage the bigger payments, though, you'll reap $47,000 in interest payments savings per $100,000 borrowed in paying off your loan in full.

$47,000 per $100,000 borrowed is a huge amount of savings and those saved monies can be used to fund items such as college, home improvement, and retirement, among others.

That said, the 15-year fixed rate mortgage is not for everyone.

Because it comes with higher monthly payments, the 15-year fixed rate mortgage may add financial stress to your household budget. And, once you have committed to a 15-year loan term and its payments, you're can't "go back". Your lender won't revert your loan to a 30-year schedule without a refinance, and a refinance could be costly.

Annual Foreclosure Filings Down For 11th Straight Month

On an annual basis, foreclosure filings fell last month. As compared to August 2010, last month's foreclosure filings dropped 33 percent. "Foreclosure filing" is a catch-all term, comprising default notices; scheduled auctions; and bank repossessions.

The study was published by foreclosure-tracking firm RealtyTrac and this month's report reveals a slowing rate of foreclosure within each of the Top 10 most foreclosure-heavy states.

All news is not good, however. 

On a monthly basis, foreclosure filings spiked, led by a surge in default notices. Default notices made their biggest one-month jump since August 2007 on the way to a 9-month high last month. Default notices are the first step in the foreclosure process so this jump may foreshadow a large number of bank repossessions as foreclosures "make their way through the process".

It's also noteworthy that just 6 states housed half of the nation's bank repossessions last month.

• California : 18 percent of bank repossessions
• Florida : 8 percent of bank repossessions
• Georgia : 7 percent of bank repossessions
• Michigan : 6 percent of bank repossessions
• Texas : 6 percent of bank repossessions
• Arizona : 6 percent of bank repossessions

As a home buyer in Plymouth , foreclosures can save you money. The National Association of REALTORS® reports that distressed homes sell with typical discounts of 20 percent versus comparable, non-distressed homes. However, buying a home from a bank is a different process from buying a home from a "person". Contract negotiations are different and it can take months to finally close on a foreclosed home.

If you're buying a foreclosed, therefore, enlist the help of a professional real estate agent. Real estate agents can help you navigate the sometimes-complicated world of foreclosures, and help you come out ahead.

Capitalize On Low Interest Rates In Overlooked Places

It's no secret. Rates are low right now. And, it's not just mortgage rates, either -- all types of rates are scraping rock-bottom. Borrowing rates, lending rates and savings rates are at or near their all-time lowest levels.

As a homeowner in Maple Grove , one way to take capitalize on today's low rates is to apply to refinance your home. But there are other ways to take advantage, too.

In this 5-minute piece from NBC's The Today Show, you'll learn of a half-dozen ways to exploit the current rate environment, including:

• Refinance a car loan from a high rate to a low rate, for cheap, in an hour
• Balance transfers between credit cards with teaser rates lasting up to 20 months
• Move some savings to an "online" bank where savings rates are higher

The interview's theme is to examine both where you're spending and saving your money, and make sure you're doing what's best for your budget.

Federal Reserve Chairman Ben Bernanke has pledged to hold the Fed Funds Rate near 0.000% until at least 2013. So long as the Fed Funds Rate is low, there will be places you can save.

Adjustable-Rate Mortgages Starting To Adjust Higher

For the first time in a year, homeowners with adjusting mortgages are facing rising mortgage rates. The interest rate by which many adjustable-rate mortgages adjust has climbed to its highest level since September 2010, and looks poised to reach higher.

This is because of the formula by which adjustable-rate mortgage adjust.

Each year, when due for a reset, an adjustable-rate mortgage's rate changes to the sum of fixed number known as a "margin", and a variable figure known as an "index". For conforming mortgages, the margin is typically set to 2.250 percent; the index is often equal to the 12-month LIBOR.

LIBOR stands for the London Interbank Offered Rate. It's a rate at which banks lend to each other overnight.

Expressed as a math formula, the adjusting ARM formula reads :

(New Mortgage Rate) = (2.250 percent) + (Current 1-Year LIBOR)

LIBOR has been rising lately, which explains why ARMs are adjusting higher as compared to earlier this year. There has been considerable stress on the financial sector and LIBOR reflects the uncertainty that bankers feel for the sector. 

LIBOR last spiked after the collapse of Lehman Brothers in 2008 amid global financial fears. Analysts expect LIBOR to rise into 2012 because of bubbling concerns in the Eurozone.

Despite LIBOR's rise, though, most adjusting, conforming ARMs are still resetting near 3 percent. For this reason, homeowners with ARMs in Minnesota may want to consider letting their respective loans adjust with the market.

This is because an adjusting mortgage rate near 3 percent may be better than what's available with a "fresh loan" -- even as 5-year ARMs rates make new all-time lows. Unlike a straight refinance to lower rates, an adjusting loan requires no closing costs, requires no appraisal, and requires no verifications.

So, if you have an adjustable-rate mortgage that's set to reset this season, don't rush to refinance it. Talk to your lender and uncover your options. Your best course of action may be to stay the course.

What's Ahead For Mortgage Rates This Week : September 12, 2011

Mortgage markets improved last week as a weakening Eurozone and questions about the U.S. economy sparked a global flight-to-quality. Conforming and FHA mortgage rates improved for the second week in a row.

The storylines should sound familiar by now. They are the same ones that have dictated the path of mortgage rates since April 2011. As a result, according to Freddie Mac, mortgage rates across Minnesota and nationwide are now at an all-time low.

Not in 50 years of tracking mortgage rates has pricing been so favorable.

Last week's holiday-shortened week didn't begin well for rate shoppers in Plymouth. Rates moved higher on the expectation of additional economic stimulus from two separate parts of the government -- the Federal Reserve and Congress. 

Wall Street held high hopes for Ben Bernanke's address to the Economic Club of Minnesota, and for the President's address to a joint session of Congress. It expected Fed Chief Bernanke to reveal clues about the Fed's next move; and it expected the President to unleash a massive jobs creation program that would put more Americans to work.

Both outcomes would have harmed mortgage rates as money flowed into stocks. However, neither happened. Bernanke kept mum on the Federal Reserve's options and the White House announced a jobs program smaller in scope than was expected.

Mortgage rates fell throughout the day Thursday then received a big boost Friday.

Amid rumors of a pending Greek default and the potential credit downgrades of several Eurozone banking groups, safe haven buying picked up and drove mortgage rates down.

Markets open this week with rates lower than they've ever been in history.

There isn't much new data set for release this week so market expectations will continue to set the direction in which mortgage rates go. If concerns for a Eurozone default rise, mortgage rates should fall. Conversely, if Eurozone chatter settles, mortgage rates should rise.

For now, mortgage rates remain at all-time lows and should not be taken for granted. If you see a rate that makes sense for you, consider locking it in.