Buyers Choosing Fixed Rate Mortgages And 15 Year Term

Buyers Choosing Fixed Rate Mortgages And 15 Year Term

According to Freddie Mac, most home buyers and refinancers are choosing fixed rate loans but prefer 15 year amortizations over the traditional 30 year fixed rate mortgage.

• Between April-June 2011, of all the Freddie Mac-to-Freddie Mac refinances, 37% of homeowners who started with a 30-year fixed transitioned into 15-year or 20-year fixed rate loans. It’s the 30-year fixed fastest abandonment rate since 2003.
• Last quarter, the gap between 30-year fixed rate mortgage rate and the rest of the loan market got wide. The spread between the 30-year fixed and 15-year fixed, for example, averaged 80 basis points.That’s the widest gap in recorded history.
• In the second quarter of 2011, fixed-rate loans accounted for about 95 percent of refinance loans, based on the Freddie Mac (OTC: FMCC) Quarterly Product Transition Report.
• Refinancing borrowers clearly preferred fixed-rate loans, regardless of whether their original loan was an adjustable-rate mortgage (ARM) or a fixed-rate.
• An increasing share of refinancing borrowers chose to shorten their loan terms during the second quarter. Of borrowers who paid off a 30-year fixed-rate loan, 37 percent chose a 15- or 20-year loan, the highest such share since the third quarter of 2003.
• Fifty-five percent of borrowers who had a hybrid ARM chose a fixed-rate loan during the second quarter, while the remaining 45 percent chose to refinance into the same type of product. The share refinancing from hybrid ARM to hybrid ARM was the highest since the second quarter of 2004.

Historically, the higher monthly payment that comes with a 15 year amortization has discouraged buyers from going that route.  Now,  given the larger than normal disparity in rate between a 30 year fixed and 15 year fixed, buyers/refinances are choosing to pay only slightly more every month in order to save literally thousands in interest over the life of the loan and own the property free and clear in half the time.

To search Philadelphia Real Estate listings for condos, homes and apartments click here.

Blog post compliments of CenterCityTeam’s Philadelphia Real Estate Blog

Frank L. DeFazio, Esquire
Prudential Fox & Roach Realtors – Society Hill
530 Walnut Street, Suite 260
Philadelphia, PA 19106
215.521.1623  Direct
610.636.4364  Cellular
888.308.1148  Fax
[email protected]
www.CenterCityTeam.com