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Some federal student loans can indeed be forgiven after 20 years. Borrowers can access forgiveness through income-driven repayment (IDR) plans and other options. These programs can make a significant difference for those who are working their way through their debt and the stress that can accompany it.
In fact, in January 2024, the Biden administration revealed that it successfully canceled nearly $5 billion in student debt for 74,000 borrowers. Of these borrowers, 30,000 received forgiveness under an IDR plan.
Getting your loans forgiven through this process isn’t as immediate and sweeping as what President Biden had originally proposed (more on that in a moment) to assist those with student debt. However, the new program effectively forgives student loans after 20 years. Here’s what to know about IDR plans and other paths to student loan forgiveness.
First, to address what you may have heard about on the news: Yes, the Supreme Court decided in the summer of 2023 to strike down President Biden’s cancellation relief plan of up to $20,000 in forgiven federal loans.
However, there’s the $5 billion in forgiveness mentioned above, and there’s still help to be accessed. Income-driven repayment plans help make your installments more manageable by stretching your term and reducing how much you owe each month. They also forgive federal student loans after 20 years or 25 years of payments, depending on the plan.
There are four IDR plan options, and each recalculates your required payment amount based on your family size and discretionary income.
• Saving on a Valuable Education (SAVE) Plan. The SAVE Plan sets your monthly payment at 10% of your discretionary income over 20 years for loans that went toward your undergraduate education. If you borrowed any federal loans for graduate school, you’ll be eligible for forgiveness after 25 years.
Also, as of summer 2024, there is the possibility that some borrowers will pay just 5% of their discretionary income and have their loans forgiven at the 10-year mark. Research the details to see if you might qualify.
• Pay As You Earn (PAYE) Plan. The PAYE Plan also has payments at 10% of your discretionary income, but payments are capped. They must be lower than what you’d pay on a 10-Year Standard Plan. The repayment period is for 20 years.
• Income-Based Repayment (IBR) Plan. IBR plans calculate your monthly payment at 10% of your discretionary income for a 20-year term. However, if you followed your loans before July 1, 2014, your payment is 15% of your discretionary income for 25 years.
• Income-Contingent Repayment (ICR) Plan. Borrowers on ICR have the highest payments in relation to their income. The ICR Plan sets payments at 20% of discretionary income for 25 years before you’d qualify for forgiveness.
Depending on your situation, you might qualify for a monthly payment of $0. After completing all payments under your IDR plan, the remaining balance on your eligible loans is forgiven. Note that based on current IRS guidelines, the canceled amount through an IDR forgiveness might be considered taxable income.
These programs can help you end your federal student loan payments and apply the money that’s freed up to other financial priorities.
💡 Quick Tip: Ready to refinance your student loan? You could save thousands.
There are a few requirements to meet eligibility requirements, depending on the IDR plan you’re interested in. First, some points to know:
• Only Direct Loans that were borrowed by the student are eligible for any IDR plan.
• Borrowers with other federal non-Direct Loans, like Federal Family Education Loan (FFEL Program Loans) or Parent PLUS Loans, must first convert their loan into a Direct Consolidation Loan to access IDR.
• Parents who do this for their Parent PLUS Loans are only eligible for the ICR Plan after consolidation.
• Only new borrowers can enroll in PAYE. New borrowers are those who didn’t have a pre-existing federal loan balance upon receiving a federal loan on or after October 1, 2007, and received their loan disbursement or Direct Consolidation Loan on or after October 1, 2011. You must meet both requirements for PAYE.
• Your loans must also be in good standing and not in default. If you have defaulted loans, you must get them out of default before enrolling in IDR. One way to do so is by participating in the Fresh Start program.
• Once you’re enrolled in an IDR plan, you must recertify your income and family size information every year. If your income drops during the year, you don’t have to wait until your due date to recertify. Instead, you can recertify immediately and have your monthly payment adjusted accordingly.
• If you’re interested in applying for an IDR plan, submit an online application by logging into your StudentAid.gov account, or by contacting your loan servicer.
Note: You can use Student Aid’s Loan Simulator to see how much your payments might be under each IDR plan.
An IDR plan is a nuanced repayment approach that has its share of benefits and disadvantages. Below is a quick overview of the pros and cons of these federal programs.
Pros:
• Helps you access impactful loan forgiveness programs.
• Might lower your monthly payment, possibly to $0 per month.
• Frees up cash flow in your budget for other expenses.
• Doesn’t require good credit.
Cons:
• You’ll pay more interest over time.
• Requires annual income and family size recertification.
• You might owe taxes on the amount forgiven by the IDR plan.
• It technically keeps you in debt longer.
💡 Quick Tip: If you have student loans with variable rates, you may want to consider refinancing to secure a fixed rate in case rates rise. But if you’re willing to take a risk to potentially save on interest — and will be able to pay off your student loans quickly — you might consider a variable rate.
Federal student loans aren’t just forgiven after 20 years or longer. There are other cancellation programs you can reach in less time, depending on your employment or loan type.
• Public Service Loan Forgiveness is available to full-time public service employees at eligible jobs. It lets you reach loan forgiveness after 120 qualifying payments while on an IDR plan. This means you could qualify for federal loan forgiveness in 10 years, instead of 20 years or longer.
• Other cancellation programs include Teacher Loan Forgiveness (TLF) which cancels up to $17,500 in federal Direct and Stafford Loans. To qualify for TLF, you must complete five years of full-time and consecutive teaching service with a qualifying educational agency or low-income school.
Recommended: What Percentage of Your Income Should Go to Student Loans?
Understanding the basics of student loans, including your repayment options, can make managing your debt smoother. Remember, student loans aren’t forever; they are a financial phase you are moving through, as you would with a mortgage or car loan.
• Make interest-only payments. If you have unsubsidized student loans, they accrue interest as soon as the loan funds are disbursed. To avoid interest capitalization (i.e. interest added to your principal balance) later, consider making interest-only payments while you’re in school.
• Put cash windfalls toward your loans. If you can afford to, redirect cash windfalls (say, a tax refund, cash gifts, or annual performance bonus) toward your student debt. This can go a long way at paying them off sooner.
• Ask about employer student loan assistance. Some companies help their employees pay off their student debt faster, by matching all or a portion of an employee’s monthly loan payment. Talk to your human resources department to see if your employer offers this benefit.
• Private education loans don’t qualify. Remember that private student loans aren’t eligible for federal loan forgiveness or other programs. If you’re struggling with your private loan payments, reach out to your lender ASAP to learn about your options.
Another alternative repayment option is a student loan refinance. This involves having a private lender pay off one or more of your existing federal loan balances and then create a new loan for the amount it paid on your behalf. The refinanced student loan will have a new rate, term, and features, and you’ll make your payments to your new lender.
Some advantages of refinancing student loans include potentially finding a lower interest rate, simplifying your repayments, and/or decreasing your monthly payment, but there are also downsides.
• If you refinance federal loans, they’re no longer eligible for federal benefits and protections, such as loan forgiveness programs or forbearance. So, before refinancing, ensure you won’t need these federal benefits in the future.
• Also, if you refinance for an extended term, you will likely pay more interest over the life of the loan. It’s important to consider how this may impact your overall financial picture.
If refinancing does seem as if it might be a good path for you, compare rates from a handful of lenders, and review the terms and costs carefully, perhaps using an online student loan refinancing calculator.
Putting money toward student loans can have a dramatic impact on your day-to-day cash flow. And, if you’re like many student loan borrowers, you’re eagerly looking forward to paying off your debt. Getting forgiveness of student loans after 20 years might sound painfully long. But with some federal plans, you might get out from under that debt sooner, reduce your payments to as low as $0, and/or get any remaining balance canceled anyway. It’s important to research your options and the qualifications so you can move past student loan debt as soon as it makes sense for your particular situation.
This prospect alone is worth talking to your federal loan servicer to see if you qualify for enrollment.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
Photo credit: iStock/hobo_018
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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SOSL0124013
Source: sofi.com
Mortgage demand receded for the third consecutive week despite slightly lower mortgage rates. Mortgage applications decreased by 0.6% on a seasonally adjusted basis during the week ending March 29, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey.
“Mortgage rates moved lower last week, but that did little to ignite overall mortgage application activity,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “Elevated mortgage rates continued to weigh down on home buying. Purchase applications were unchanged overall, although FHA purchases did pick up slightly over the week. Refinance applications decreased to fall 5% below last year’s pace.”
As of March 26, the 30-year fixed rate on HousingWire’s Mortgage Rates Center stood at 7.16%, up from 7.07% one week earlier. At the same time one year ago, the 30-year fixed rate averaged 6.53%. Meanwhile, the 15-year fixed rate averaged 6.51% on March 26, up from 6.5% one week earlier.
Both purchase and refinance activity decreased during the week. Purchase loan application volume dropped by 1% from one week earlier. Meanwhile, refinance volume fell by 2% from the prior week.
The MBA survey shows that the average mortgage rate for 30-year fixed loans with conforming balances ($766,550 or less) decreased to 6.91%, down from 6.93% last week. Meanwhile, rates on jumbo loans (balances greater than $766,550) decreased week over week to 7.06%, down from 7.14%.
The Federal Housing Administration (FHA) share of total applications decreased to 11.7% last week, down from 12% the week before. The U.S. Department of Veterans Affairs (VA) share climbed to 12.1%, up from 12% the week before. And the U.S. Department of Agriculture (USDA) share remained unchanged at 0.5%.
The MBA survey, conducted weekly since 1990, covers more than 75% of all U.S. retail residential mortgage applications.
Source: housingwire.com
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Mortgage rates are down significantly this week. Average 30-year mortgage rates have dropped nearly 30 basis points from a week ago, according to Zillow data. And they could drop further this year.
As inflation slows and the economy comes into better balance, mortgage rates are expected to go down. Inflation has been a bit stickier than expected over the last few months, but Federal Reserve officials have indicated that they still believe it will continue to slow and enable them to start lowering the federal funds rate this year. This should take a lot of upward pressure off of mortgage rates and allow them to decrease.
Right now, investors are pricing in a Fed cut in June, according to the CME FedWatch Tool. So we could see mortgage rates start trending down more substantially in just a few months.
Mortgage type | Average rate today |
Real Estate on Zillow
Mortgage type | Average rate today |
Real Estate on Zillow
Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.
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Your estimated monthly payment
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The current average 30-year fixed mortgage rate is 6.32%, down 27 points from where it was this time last week, according to Zillow data. This rate is also down compared to a month ago, when it was 6.59%.
At 6.32%, you’ll pay $620 monthly toward principal and interest for every $100,000 you borrow.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.
The average 20-year fixed mortgage rate is 24 points down from where it was last week, and is sitting at 5.99%. This time last month, the rate was 6.30%.
With a 5.99% rate on a 20-year term, your monthly payment will be $716 toward principal and interest for every $100,000 borrowed.
A 20-year term isn’t as common as a 30-year or 15-year term, but plenty of mortgage lenders still offer this option.
The average 15-year mortgage rate is 5.64%, down from last week. It’s also down compared to this time last month, when it was 5.98%.
With a 5.64% rate on a 15-year term, you’ll pay $825 each month toward principal and interest for every $100,000 borrowed.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.
The 7/1 adjustable mortgage rate is down 60 basis points from a week ago, currently at 6.18%. It’s also down from a month ago, when it was at 6.47%.
At 6.18%, your monthly payment would be $611 toward principal and interest for every $100,000 borrowed — but only for the first seven years. After that, your payment would increase or decrease annually depending on the new rate.
The average 5/1 ARM rate is 6.51%, a 49-point decrease from last week. It’s down from where it was a month ago, when it was 6.74%.
Here’s how a 6.51% rate would affect you for the first five years: You’d pay $633 per month toward principal and interest for every $100,000 you borrow.
The average 30-year FHA interest rate is 5.65% today, which is just 3 basis points up from last week. This rate was 6.11% a month ago.
At 5.65%, you would pay $577 monthly toward principal and interest for every $100,000 borrowed.
FHA mortgages are good choices if you don’t qualify for a conforming mortgage. You’ll need a 3.5% down payment and 580 credit score to qualify.
The current VA mortgage rate is 5.54%, 38 basis points lower than this time last week. This rate was 5.92% a month ago.
With a 5.54% rate, your monthly payment would be $570 toward principal and interest for every $100,000 you borrow.
The average 30-year refinance rate is 7.69%, 69 basis points higher than last week. It’s nearly flat compared to a month ago, when it was 7.65%.
Here’s how a 7.69% rate would affect your monthly payments: You’d pay $712 toward principal and interest for every $100,000 borrowed.
Refinancing into a 30-year term can land you lower monthly payments, but you’ll ultimately pay more by refinancing into a longer term.
The current 20-year fixed refinance rate is 7.66%, which is 120 basis points up compared to a week ago. This rate was 6.42% this time last month.
A 7.66% rate on a 20-year term will result in a $815 monthly payment toward principal and interest for every $100,000 you borrow.
The average 15-year fixed refinance rate is 6.92%, which is more than half a percentage point higher compared to last week. It’s down just a little bit compared to this time a month ago, when it was at 6.99%.
A 6.92% rate on a 15-year term means you’ll pay $894 each month toward principal and interest for every $100,000 borrowed.
Refinancing into a 15-year term can save you money in the long run, because you’ll get a lower rate and pay off your mortgage faster than you would with a 30-year term. But it could result in higher monthly payments.
The average 7/1 ARM refinance rate is 6.83%, down 32 points from where it was last week. It’s up a bit from a month ago, when it was 6.69%.
Refinancing into a 7/1 ARM with a 6.83% rate means your monthly payment toward principal and interest will be $654 for every $100,000 you borrow. This will be the payment for the first seven years, then your rate will change annually unless you refinance again.
The 5/1 ARM refinance rate is 6.44%, which is significantly lower than it was this time last week. It’s up a bit compared to this time last month, when it was 6.34%.
A 6.44% rate will result in a monthly payment of $628 toward principal and interest for every $100,000 borrowed. You’ll pay this amount for the first five years of your new mortgage.
The 30-year FHA refinance rate is 5.52%, which is 10 points lower than last week. This rate was 5.61% this time last month.
A 5.52% refinance rate would lead to a $569 monthly payment toward the principal and interest per $100,000 borrowed.
The average 30-year VA refinance rate is 5.56%, which is down compared to where it was was last week. This rate was 5.78% a month ago.
At 5.56%, your new monthly payment would be $572 toward principal and interest for every $100,000 you borrow.
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Mortgage rates also rose dramatically in 2023, though they started trending back down toward the end of the year. Though rates have been somewhat elevated recently, they should go down by the end of 2024.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease further. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
Source: businessinsider.com
Mortgage rates remained stable this week as the personal consumption expenditures (PCE) inflation report matched economists’ expectations.
As a result, HousingWire’s Mortgage Rates Center showed the average 30-year fixed rate for conventional loans at 7.17% on Tuesday, up from 7.16% one week earlier. At the same time one year ago, the 30-year fixed rate averaged 6.5%. Meanwhile, the 15-year fixed rate averaged 6.43% on Tuesday, down from 6.51% one week earlier.
“We had the PCE inflation report come out Friday and because some people were expecting a hotter number than estimates, it was perceived to be bullish for rate cuts,” HousingWire lead analyst Logan Mohtashami wrote on Saturday.
“The 10-year yield channel is between 4.25%-3.80%, which looks correct as long as the economic data stays firm and jobless claims don’t break higher. This means mortgage rates will likely remain in the upper range of my 2024 forecast of 6.75%-7.25%.
“Monday’s economic data was good; the manufacturing data came in at a huge beat and the GDP (gross domestic product) revisions were positive for this quarter’s upside,” Mohtashami added. “For the first time in a long time, both the U.S. manufacturing data are now in expansion territory. Bond yields rose and we have four labor reports to work on this week.”
As of March 29, there were 517,355 single-family homes on the market, up from 512,759 the week prior. During the same week last year, inventory fell from 413,883 to 410,734. The all-time inventory low was in 2022 at 240,194, while the inventory peak for 2023 was 569,898.
“We should have close to 700,000 homes on the market in August or September,” Mike Simonsen, founder and president of Altos Research, wrote on Monday. “It won’t be a lot actually, but it’ll be the most homes available since 2019. The longer we stay at higher mortgage rates, the more inventory can build back to the old normal levels.”
According to the April 2024 Mortgage Monitor report from Intercontinental Exchange (ICE), homeowners who took out mortgages with near-record-low rates in 2020 and 2021 face much higher monthly payments even if they move to an equivalently priced home. A “lateral move” of this type would cost 60% more per month, ICE reported.
“Lower rates would ease the calculation for many and make moves more reasonable,” Andy Walden, vice president of enterprise research at ICE Mortgage Technology, said in a statement. “But the net result continues to be too few homes for too many buyers. Until that fundamental mismatch is addressed, simple supply and demand will continue to press on both inventory and affordability.”
Source: housingwire.com
Mortgage loans refinancing declined for the week ending March 22, contributing to a drop in home loans applications even as interest rates decelerated, data from the Mortgage Bankers Association (MBA) showed on Wednesday.
The Refinance Index fell 2 percent from the prior week and was 9 percent lower compared to a year ago. Overall, mortgage applications dropped by 0.7 percent at a time when the 30-year fixed rate mortgage ticked down to 6.93 percent from the prior week’s 6.97 percent.
“Mortgage application activity was muted last week despite slightly lower mortgage rates. The 30-year fixed rate edged lower to 6.93 percent, but that was not enough to stimulate borrower demand,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement shared with Newsweek.
Read more: What is Mortgage Refinancing and How Does It Work?
The drop in refinancing applications comes as the housing market has been in flux nationwide.
Borrowing costs for home loans jumped to their highest since the turn of the century last year, peaking at about 8 percent in the fall. That jump in mortgage rates was sparked by the Federal Reserve hiking rates to their highest in more than two decades as policymakers moved to tighten financial conditions to battle soaring inflation. Expectations that the central bank will start lowering those rates has helped bring mortgage rates down.
Recent data suggests that buyers are still looking for lower borrowing costs. New home sales declined in February, amid high mortgage rates that economists say depressed activity as the housing market enters its busy Spring season.
Kan said on Wednesday that still elevated mortgage rates are still keeping buyers on the sidelines.
“Purchase applications were essentially unchanged, as homebuyers continue to hold out for lower mortgage rates and for more listings to hit the market,” he noted.
Kan suggest limited housing inventory is also proving to be a hindrance to the market.
“Lower rates should help to free up additional inventory as the lock-in effect is reduced, but we expect that will only take place gradually, as we forecast that rates will move toward 6-percent by the end of the year,” he said. “Similarly, with rates remaining elevated, there is very little incentive right now for rate/term refinances.”
Read more: Best Mortgage Lenders
The lock-in effect was particularly acute in the existing homes market. Most homeowners have low mortgage rates which has discouraged them from putting their properties in the market if that means they may have to acquire a new home with borrowing costs closer to 7 percent. About 90 percent of homeowners own mortgages that are under 6 percent, according to real estate platform Redfin.
There have been some signs recently that the existing homes market is recovering after struggling mightily last year.
In February, sales of previously owned homes rose by nearly 10 percent.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
A home equity loan is a lump sum of money you can borrow at a fixed rate based on the equity, or ownership stake, in your home. If you already paid off 15% to 20% of your house, this one-time installment loan can be used to cover major expenses, from home renovations to paying off debt.
Home equity loans have fixed interest rates, so your monthly payments are predictable and easy to budget for. But because your home acts as collateral for the loan, you could risk foreclosure if you fall behind on repayments.
I’ve spoken with experts about the advantages and disadvantages of home equity loans, how they work and where to find the best rates. Here’s what I’ve uncovered.
Here are the average rates for home equity loans and home equity lines of credit as of March 27, 2024.
Loan type | This week’s rate | Last week’s rate | Difference |
---|---|---|---|
10-year, $30,000 home equity loan | 8.73% | 8.73% | None |
15-year, $30,000 home equity loan | 8.70% | 8.70% | None |
$30,000 HELOC | 9.01% | 8.99% | +0.02 |
Though home equity loan rates will vary depending on the lender and loan type, their rates are generally lower than personal loans or credit card annual percentage rates.
Home equity loan rates aren’t directly set by the Federal Reserve, but adjustments to the federal funds rate impact the borrowing cost for financial products like home equity loans and home equity lines of credit, aka HELOCs.
Since March 2022, the Fed has hiked its benchmark rate a total of 11 times in an attempt to slow the economy and bring inflation down, driving home equity loan rates up alongside. Though the Fed has kept interest rates steady since last summer, home equity loan rates have remained elevated for borrowers. Home equity rates are likely to stay high until the central bank begins cutting interest rates, projected for later this year.
With home equity loans, you tap into your equity without giving up the rate on your primary mortgage, making them a popular alternative to cash-out refinances. If you use a home equity loan to install solar panels or renovate your kitchen, you get the added benefit of increasing your home’s value.
“Most homeowners with mortgages in 2024 are choosing home equity loans or HELOCs, instead of a cash-out refinance, to avoid losing their attractive interest rates,” said Vikram Gupta, head of home equity at PNC Bank.
Lender | APR | Loan amount | Loan terms | Max LTV ratio |
---|---|---|---|---|
U.S. Bank | From 8.40% | Not specified | Up to 30 years | Not specified |
TD Bank | 7.99% (0.25% autopay discount included) | From $10,000 | 5 to 30 years | Not specified |
Connexus Credit Union | From 7.20% | From $5,000 | 5 to 15 years | 90% |
KeyBank | From 10.29% (0.25% autopay discount included) | From $25,000 | 1 to 30 years | 80% for standard home equity loans, 90% for high-value home equity loans |
Spring EQ | Fill out application for personalized rates | Up to $500,000 | Not specified | 90% |
Third Federal Savings & Loan | From 7.29% | $10,000 to $200,000 | Up to 30 years | 80% |
Frost Bank | From 7.3% (0.25% autopay discount included) | $2,000 to $500,000 | 15 to 20 years | 90% |
Regions Bank | From 6.75% to 14.125% (0.25% autopay discount included) | $10,000 to $250,000 | 7, 10, 15, 20 or 30 years | 89% |
Discover | 6.99% for 1st liens, 7.99% for 2nd liens | $35,000 to $300,000 | 10, 15, 20 or 30 years | 90% |
BMO Harris | From 8.84% (0.5% autopay discount not included) | From $25,000 | 5 to 20 years | Not specified |
Good for nationwide availability
U.S. Bank is the fifth largest banking institution in the US. It offers both home equity loans and HELOCs in 47 states. You can apply for a home equity loan or HELOC through an online application, by phone or in person. If you want a loan estimate for a home equity loan without completing a full application, you can get one by speaking with a banker over the phone.
Good for price transparency
Primarily operating on the East Coast, TD Bank offers home equity loans and HELOCs in 15 states. You can apply for a TD Bank home equity loan or HELOC online, by phone or by visiting a TD Bank in person. The online application includes a calculator that will tell you the maximum amount you can borrow based on the information you input. You can also see a full breakdown of rates, fees and monthly payments. No credit check is required for this service.
Good branch network
Connexus Credit Union operates in all 50 states, but it offers home equity loans and HELOCs in 46 states (excluding Alaska, Hawaii, Maryland and Texas). The credit union has more than 6,000 local branches. To apply for a home equity loan or HELOC with Connexus, you can fill out a three-step application online or in person. You won’t be able to see a personalized rate or product terms without a credit check.
Good online application user experience
Based in Cleveland, KeyBank offers home equity loans to customers in 15 states and HELOCs to customers in 44 states. Aside from a standard home equity loan, KeyBank offers a few different HELOC options. The KeyBank application allows you to apply for multiple products at one time. If you’re not sure whether KeyBank loans are available in your area, the application will tell you once you input your ZIP code. If you’re an existing KeyBank customer, you can skim through the application and import your personal information from your account.
Good option for high debt-to-income ratio limits
Spring EQ was founded in 2016 and serves customers in 38 states. Spring EQ offers home equity loans and HELOCs. Spring EQ doesn’t display rates for its home lending products online — you must complete an application to see your personalized rate. The Spring EQ loan application process is simple though. Customers can see an extensive breakdown of their loan term and rate options without needing to undergo a credit check or provide their Social Security number.
Good option for rate match guarantee
Third Federal Savings & Loan first opened in 1938. Today, the bank offers home equity loans in eight states and HELOCs in 26 states. Third Federal offers a lowest rate guarantee on its HELOCs and home equity loans, meaning Third Federal will offer you the lowest interest rate relative to other similar lenders or pay you $1,000. You can apply for a home equity loan or HELOC on the Third Federal website. You won’t have to register an account to apply, but you’re still able to save your application and return to it later.
Good option for Texas borrowers
Frost Bank’s home equity loans and HELOCs are only available to Texas residents. You can apply for a home equity loan or HELOC on the Frost Bank website, but you’ll need to create an account. According to the website, the application will only take you 15 minutes.
Good rate discounts
Regions Bank is one of the nation’s largest banking, mortgage and wealth management service providers. Regions offers home equity loans and HELOCs in 15 states. You can apply for a Regions home equity loan or HELOC online, in person or over the phone. You’ll have to create an account with Regions to apply. Before you create an account, though, you can use the bank’s own rate calculator to estimate your rate and monthly payment.
Good option for no fees or closings costs
Discover is known primarily for its credit cards, but it also offers home equity loans — available in 48 states. The lender does not offer HELOCs at all. You can apply for a home equity loan from Discover online or over the phone. The application process takes approximately six to eight weeks in total, according to Discover’s website.
Good option for second liens
BMO Harris products and services are available in 48 states (all but New York and Texas). BMO Harris offers home equity loans and three variations of a HELOC. You can apply for a home equity loan or HELOC online or in person, but in order to get personalized rates, you’ll have to speak with a representative on the phone. Getting personalized rates doesn’t require a hard credit check.
Home equity loans from BMO Harris are only available as second liens. If you have already paid off your mortgage, a rate-lock HELOC from BMO Harris may be a better option.
A home equity loan is a fixed-rate installment loan secured by your home as a second mortgage. You’ll get a lump sum payment upfront and then repay the loan in equal monthly payments over a period of time. Because your house is used as a collateral, the lender can foreclose on it if you default on your payments.
Most lenders require you to have 15% to 20% equity in your home to secure a home equity loan. To determine how much equity you have, subtract your remaining mortgage balance from the value of your home. For example, if your home is worth $500,000 and you owe $350,000, you have $150,000 in equity. The next step is to determine your loan-to-value ratio, or LTV ratio, which is your outstanding mortgage balance divided by your home’s current value. So in this case the calculation would be:
$350,000 / $500,000 = 0.7
In this example, you have a 70% LTV ratio. Most lenders will let you borrow around 75% to 90% of your home’s value minus what you owe on your primary mortgage. Assuming a lender will let you borrow up to 90% of your home equity, you can use the formula to see how that would be:
$500,000 [current appraised value] X 0.9 [maximum equity percentage you can borrow] – $350,000 [outstanding mortgage balance] = $100,000 [what the lender will let you borrow]
A standard repayment period for a home equity loan is between five and 30 years. Under the loan, you make fixed-rate payments that never change. If interest rates go up, your loan rate remains unchanged.
Second mortgages such as home equity loans and HELOCs don’t alter a homeowner’s primary mortgage. This lets you borrow against your home’s equity without needing to exchange your primary mortgage’s rate for today’s higher rates.
Home equity loans have fixed interest rates, which is a positive if you’re looking for predictable monthly payments. The rate you lock in when you take out your loan will be constant for the entire term, even if market interest rates rise.
A home equity loan is a good choice if you need a large sum of cash all at once. You can use that cash for anything you’d like — it doesn’t have to be home-related.However, some uses make more sense than others.
Experts don’t recommend using a home equity loan for discretionary expenses like a vacation or wedding. Instead, try saving up money in advance for these expenses so you can pay for them without taking on unnecessary debt.
One lump sum payment of total loan up front.
Fixed interest rate, meaning you won’t have to worry about your rate rising over the repayment period.
Typically lower interest rate than credit cards or personal loans.
Little to no restrictions on what you can use the money for.
Your home is used as collateral, meaning it can be taken from you if you default on the loan.
If you’re still paying off your mortgage, this loan payment will be on top of that.
Home equity loans can come with closing costs and other fees.
May be hard to qualify for if you don’t have enough equity.
Home equity loans and HELOCs are similar but have a few key distinctions. Both let you draw on your home’s equity and require you to use your home as collateral to secure your loan. The two major differences are the way you receive the money and how you pay it back.
A home equity loan gives you the money all at once as a lump sum, whereas a HELOC lets you take money out in installments over a long period of time, typically 10 years. Home equity loans have fixed-rate payments that will never go up, but most HELOCs have variable interest rates that rise and fall with the prime rate.
A cash-out refinance is when you replace your existing mortgage with a new mortgage, typically to secure a lower interest rate and more favorable terms. Unlike a traditional refinance, though, you take out a new mortgage for the home’s entire value — not just the amount you owe on your mortgage. You then receive the equity you’ve already paid off in your home as a cash payout.
For example, if your home is worth $450,000, and you owe $250,000 on your loan, you would refinance for the entire $450,000, rather than the amount you owe on your mortgage. Your new cash-out refinance home loan would replace your existing mortgage and then offer you a portion of the equity you built (in this case $200,000) as a cash payout.
Both a cash-out refi and a home equity loan will provide you with a lump sum of cash that you’ll repay in fixed amounts over a specific time period, but they have some important differences. A cash-out refinance replaces your current mortgage payment. When you receive a lump sum of cash from a cash-out refi, it’s added back onto the balance of your new mortgage, usually causing your monthly payment to increase. A home equity loan is different — it doesn’t replace your existing mortgage and instead adds an additional monthly payment to your expenses.
Although it varies by lender, to qualify for a home equity loan, you’re typically required to meet the following criteria:
You’ll want to consider what type of financial institution best suits your needs. In addition to mortgage lenders, financial institutions that offer home equity loans include banks, credit unions and online-only lenders.
“Select a lender that makes you feel comfortable and informed with the home equity loan process,” said Rob Cook, vice president of marketing, digital and analytics for Discover Home Loans. “Look at what tools a lender makes available to borrowers to help inform their decision. For many borrowers, being able to apply and manage their application online is important.”
One option is to work with the lender that originated your first mortgage as you already have a relationship and a history of on-time payments. Many banks and credit unions also offer discounted rates and other benefits when you become a customer.
Some lenders offer lower interest rates but charge higher fees (and vice versa). What matters most is your annual percentage rate because it reflects both interest rate and fees.
Ensure the specific terms of the loan your lender is offering make sense for your budget. For example, be sure the minimum loan amount isn’t too high — be wary of withdrawing more funds than you need. You also want to make sure that your repayment term is long enough for you to comfortably afford the monthly payments. The shorter your loan term, the higher your monthly payments will be.
“Costs and fees are an important consideration for anyone who is looking for a loan,” Cook said. “Homeowners should understand any upfront or ongoing fees applicable to their loan options. Also look for prepayment penalties that might be associated with paying off your loan early.”
No matter what, it’s important to talk to numerous lenders and find the best rate available.
Applying for a home equity loan is similar to applying for any mortgage loan. You’ll need both a solid credit score and proof of enough income to repay your loan.
1. Interview multiple lenders to determine which lender can offer you the lowest rates and fees. The more companies you speak with, the better your chances of finding the most favorable terms.
2. Have at least 15% to 20% equity in your home. If you do, lenders will then take into account your credit score, income and current DTI to determine whether you qualify as well as your interest rate.
3. Be prepared to have financial documents at the ready, such as pay stubs and Form W-2s. Proof of ownership and the appraised value of your home will also be necessary.
4. Close on your loan. Once you submit your application, the final step is closing on your loan. In some states, you’ll have to do this in person at a physical branch.
As of March 27, average home equity loan rates are 8.73% for a $30,000 10-year home equity loan and 8.70% for a $30,000 15-year home equity loan — higher than the average rate for a 30-year fixed rate mortgage, which is currently 7.01%. Both home equity rates and mortgage rates started off at historic lows at around 3% at the beginning of 2022 and have been consistently climbing in response to the Federal Reserve aggressively raising the benchmark interest rate.
Most lenders will allow you to borrow anywhere from 15% to 20% of your home’s available equity. To calculate your home equity, subtract your remaining mortgage balance from the current appraised value of your home. How much equity a bank or lender will let you take out depends on a number of additional factors such as your credit score, income and DTI ratio. For most homeowners, it can take five to 10 years of mortgage payments to build up enough tappable equity to borrow against.
A home equity loan can affect your score positively or negatively depending on how responsibly you use it. As with any loan, if you miss or make late payments, your credit score will drop. The amount by which it will drop depends on such factors as whether you’ve made late payments before. However, HELOCs are secured loans that are backed by your property, so they tend to affect your credit score less because they’re treated more like a car loan or mortgage by credit-scoring algorithms.
Lenders are currently offering rates that start as low as 5% to 6% for borrowers with good credit, but rates can vary depending on your personal financial situation. A lender will base your interest rate on how much equity you have in your home, your credit score, income level and other aspects of your financial life such as your DTI ratio, which is calculated by dividing your monthly debts by your gross monthly income.
Home equity loans can be used for anything you choose to spend the money on. Typical life expenses that people usually take out home equity loans for are to cover expenditures such as home renovations, higher education costs like tuition or to pay off high-interest charges like credit card debt. There’s a bonus for using your loan for home improvements and renovations: the interest is tax deductible.
You can also use a home equity loan in the event of an emergency like unplanned medical expenses. Whatever you chose to use your loan for, keep in mind that taking out a large sum of money that accrues interest is an expensive choice to carefully consider, especially because you’re using your home as collateral to secure the loan. If you can’t pay back the loan, the lender can seize your home to repay your debt.
We evaluated a range of lenders based on factors such as interest rates, APRs and fees, how long the draw and repayment periods are, and what types and variety of loans are offered. We also took into account factors that impact the user experience such as how easy it is to apply for a loan online and whether physical lender locations exist.
Source: cnet.com
Editor’s Note: Parts of this story were auto-populated using data from Curinos, a mortgage research firm that collects data from more than 250 lenders. For more details on how we compile daily mortgage data, check out our methodology here.
Mortgage rates have moved gradually over the past few weeks, with the 30-year fixed-rate mortgage reaching 7.20% APR today, after standing at 7.45% a month ago, according to data from Curinos analyzed by MarketWatch Guides.
Rates moved upward just before last week’s meeting of the Federal Reserve. While the Fed kept interest rates steady, Chairman Jerome Powell indicated in a press conference Wednesday that the board still expected to cut interest rates three times in 2024 despite “seasonal effects” causing a temporary rise in inflation.
Last month’s home prices rose 9.5% month-over-month for February, the largest increase in a year. The median home price increased 5.7% from last year, to $384,500, the National Association of Realtors reported on Thursday.
Here are today’s average mortgage rates:
Product | Rate | Last Week | Change |
30-Year Fixed Rate | 7.20% | 7.19% | +0.01 |
15-Year Fixed Rate | 6.46% | 6.48% | -0.02 |
5/6 ARM | 6.99% | 6.98% | +0.01 |
7/6 ARM | 7.17% | 7.14% | +0.03 |
10/6 ARM | 7.20% | 7.22% | -0.02 |
30-Year Fixed Rate Jumbo | 7.10% | 7.09% | +0.01 |
30-Year Fixed Rate FHA | 6.93% | 6.90% | +0.03 |
30-Year Fixed Rate VA | 6.98% | 6.98% | 0.00 |
Disclaimer: The rates above are based on data from Curinos, LLC. All rate data is accurate as of Friday, March 29, 2024. Actual rates may vary.
>> View historical mortgage rate trends
The average 30-year fixed-mortgage rate is 7.20%. Since the same time last week, the rate is up, changing +0.01 percentage points.
At the current average rate, you’ll pay $678.79 per month in principal and interest for every $100,000 you borrow. You’re paying more compared to last week when the average rate was 7.19%.
The average rate you’ll pay for a 15-year fixed-mortgage is 6.46%, a decrease of -0.02 percentage points compared to last week.
Monthly payments on a 15-year fixed-mortgage at a rate of 6.46% will cost approximately $868.91 per $100,000 borrowed. With the rate of 6.48% last week, you would’ve paid $870.01 per month.
The average rate on a 5/6 adjustable rate mortgage is 6.99%, an increase of +0.01 percentage points over the last seven days.
Adjustable-rate mortgages, commonly referred to as ARMs, are mortgages with a fixed interest rate for a set period of time followed by a rate that adjusts on a regular basis. With a 5/6 ARM, the rate is fixed for the first 5 years and then adjusts every six months over the next 25 years.
Monthly payments on a 5/6 ARM at a rate of 6.99% will cost approximately $664.63 per $100,000 borrowed over the first 5 years of the loan.
The average jumbo mortgage rate today is 7.10%, an increase of +0.01 percentage points over the past week.
Jumbo loans are mortgages that exceed loan limits set by the Federal Housing Finance Agency (FHFA) and funding criteria of Freddie Mac and Fannie Mae. This generally means that the amount of money borrowed is higher than $726,200.
Product | Monthly P&I per $100,000 | Last Week | Change |
30-Year Fixed Rate | $678.79 | $678.11 | +$0.68 |
15-Year Fixed Rate | $868.91 | $870.01 | -$1.10 |
5/6 ARM | $664.63 | $663.96 | +$0.67 |
7/6 ARM | $676.76 | $674.73 | +$2.03 |
10/6 ARM | $678.79 | $680.14 | -$1.35 |
30-Year Fixed Rate Jumbo | $672.03 | $671.36 | +$0.67 |
30-Year Fixed Rate FHA | $660.61 | $658.60 | +$2.01 |
30-Year Fixed Rate VA | $663.96 | $663.96 | $0.00 |
Note: Monthly payments on adjustable-rate mortgages are shown for the first five, seven and 10 years of the loan, respectively.
Mortgage rates change frequently based on the economic environment. Inflation, the federal funds rate, housing market conditions and other factors all play into how rates move from week-to-week and month-to-month.
But outside of macroeconomic trends, several other factors specific to the borrower will affect the mortgage interest rate. They include:
Comparison shopping for a mortgage can be overwhelming, but it’s shown to be worth the effort. Homeowners may be able to save between $600 and $1,200 annually by shopping around for the best rate, researchers found in a recent study by Freddie Mac. That’s why we put together steps on how to shop for the best mortgage rate.
1. Check credit scores and credit reports
A borrower’s credit situation will likely determine the type of mortgage they can pursue, as well as their rate. Conventional loans are typically only offered to borrowers with a credit score of 620 or higher, while FHA loans may be the best option for borrowers with a FICO score between 500 and 619. Additionally, individuals with higher credit scores are more likely to be offered a lower mortgage interest rate.
Mortgage lenders often review scores from the three major credit bureaus: Equifax, Experian and TransUnion. By viewing your scores ahead of lenders considering you for a loan, you can check for errors and even work to improve your score by paying down balances and limiting new credit cards and loans.
2. Know the options
There are four standard mortgage programs: conventional, FHA, VA and USDA. To get the best mortgage rate and increase your odds of approval, it’s important for potential borrowers to do their research and apply for the mortgage program that best fits their financial situation.
The table below describes each program, highlighting minimum credit score and down payment requirements.
Though conventional mortgages are most common, borrowers will also need to consider their repayment plan and term. Rates can be either fixed or adjustable and terms can range from 10 to 30 years, though most homeowners opt for a 15- or 30-year mortgage.
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3. Compare quotes across multiple lenders
Shopping around for a mortgage goes beyond comparing rates online. We recommend reaching out to lenders directly to see the “real” rate as figures listed online may not be representative of a borrower’s particular situation. While most experts recommend getting quotes from three to five lenders, there is no limit on the number of mortgage companies you can apply with. In many cases, lenders will allow borrowers to prequalify for a mortgage and receive a tentative loan offer with no impact to their credit score.
After gathering your loan documents – including proof of income, assets and credit – borrowers may also apply for pre-approval. Pre-approval will let them know where they stand with lenders and may also improve negotiating power with home sellers.
4. Review loan estimates
To fully understand which lender is offering the cheapest loan overall, take a look at the loan estimate provided by each lender. A loan estimate will list not only the mortgage rate, but also a borrower’s annual percentage rate (APR), which includes the interest rate and other lender fees such as closing costs and discount points.
By comparing loan estimates across lenders, borrowers can see the full breakdown of their possible costs. One lender may offer lower interest rates, but higher fees and vice versa. Looking at the loan’s APR can give you a good apples-to-apples comparison between lenders that takes into account both rates and fees.
5. Consider negotiating with lenders on rates
Mortgage lenders want to do business. This means that borrowers may use competing offers as leverage to adjust fees and interest rates. Many lenders may not lower their offered rate by much, but even a few basis points may save borrowers more than they might think in the long run. For instance, the difference between 6.8% and 7.0% on a 30-year, fixed-rate $100,000 mortgage is roughly $5,000 over the life of the loan.
Mortgage rates have cooled significantly over the past several months. After the 30-year fixed-rate mortgage hit 8% last October, it ended 2023 closer to 7%. In fact, the average for Q4 2023 was 7.3%.
Analysts with Fannie Mae and the Mortgage Bankers Association (MBA) both project that rates will fall going into 2024 and throughout next year.
Fannie Mae economists expect rates to drop more quickly, falling below 6% by Q4 2024. Meanwhile, the MBA’s forecast for Q4 2024 is 6.1% and 5.9% for Q1 2025.
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Every weekday, MarketWatch Guides provides readers with the latest rates on 11 different types of mortgages. Data for these daily averages comes from Curinos, LLC, a leading provider of mortgage research that collects data from more than 250 lenders. For more details on how we compile daily mortgage data, check out our comprehensive methodology here. Editor’s Note: Before making significant financial decisions, consider reviewing your options with someone you trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.
Source: marketwatch.com
US households have felt the pain of higher interest rates over the last two years. Homebuyers taking out a home loan with a 7% interest rate are likely budgeting hundreds more than expected to cover their average monthly mortgage payment.
A recent survey by Realtor.com noted that 22% of potential homebuyers said they’d be more willing to take on a mortgage if rates were to drop below 6%. Most mortgage forecasts don’t expect rates to dip below that number until 2025.
But you don’t have to wait for market rates to drop. Getting a 6% mortgage rate could be possible right now.
Mortgage rates change daily, but as of March, the average weekly rate on a 30-year fixed-rate mortgage has been around 7%, according to Bankrate, CNET’s sister site.
Rates generally climb higher when the economy is strong and drop at the sign of trouble. When the pandemic pushed the economy into uncertainty in 2020, rates plummeted to historic lows and hovered below 4% for the next two years.
Yet high inflation and the Federal Reserve’s aggressive interest rate hikes pushed rates higher, reaching 8% last October.
“What’s keeping rates volatile and higher is an underlying strong economy,” said Nicole Rueth, senior vice president with Movement Mortgage. “We continue to have economic reports and indicators that show consumers are spending and staying confident.”
The good news for homebuyers is that mortgage rates are expected to slowly decline in 2024, though they won’t reach record lows again.
Snagging a 6% rate can offer savings on your monthly payment and over the life of the loan. A difference of 1 percentage point may not seem like much, but the savings add up over time.
For instance, let’s say you buy a home for $400,000 and make a down payment of 20% on a 30-year fixed-rate mortgage. The difference between a 7% rate and a 6% rate means a savings of $210 a month, which amounts to $75,746 saved over the life of the loan.
Many factors go into determining mortgage rates. You can’t control the economic factors, but there are ways to prepare your finances to get the best deal and lower your personal rate.
A mortgage point, also known as a mortgage discount point, is an upfront fee you can pay the lender in exchange for a lower interest rate on your home loan. Each point costs 1% of the purchase price of a home and usually knocks the rate down by 0.25%.
On a $400,000 home, you’d pay $4,000 for one discount point. The lender may even allow you to buy four mortgage points to lower the rate from 7% to 6%, though you’d have to shell out $16,000 to get there.
To check whether this strategy is worthwhile, take the total cost of the points, and compare it to the overall monthly savings. “How long is it going to take you to pay it back? Are you going to be in the house that long?” Rueth asked.
In this case, when you pay $16,000 to buy four points and save $210 per month, it would take you more than six years to reach your break-even point.
Lenders look at your credit score to decide whether you qualify for a home loan and the interest rate you receive. Generally, a higher credit score shows you’ve managed debt responsibly in the past. A better credit history lowers your risk to a lender, which can help you secure a lower interest rate.
In fact, raising your credit score from the “fair” range to the “very good” range may help lower your rate by around 0.22 percentage points, according to a 2024 Lending Tree survey. In the survey example, that rate difference helped borrowers save $16,677 over the lifetime of a home loan.
Your down payment is the amount you can contribute to your home purchase upfront. Each type of home loan comes with a minimum down payment, usually ranging from 0% to 5%, but a higher down payment can help lower your rate. That’s because the lender takes on less risk when you contribute more toward the loan.
Because a down payment lowers your rate and contributes to your home equity, some home loan experts recommend making a larger down payment, around 20%, instead of buying mortgage points. That’s because if you sell the home or refinance before reaching your break-even point, you lose money. But the amount you spent for your down payment becomes part of your equity.
An adjustable-rate mortgage, or ARM, is a home loan with a fixed rate for a set introductory period, such as five years. Once that period ends, the interest rate can go up or down in regular intervals for the remaining term.
The big appeal of ARMs is that the introductory interest rate is often lower than the rate on traditional mortgages. In early March, the average 5/1 ARM rate was 6.61% compared to 6.98% for 30-year fixed-rate mortgages.
When you’re applying for mortgage loans, you don’t have to go with the company that did your preapproval. In fact, research shows that getting rate quotes from multiple lenders and comparing offers can result in significant savings. If you want to use this strategy, start by submitting a mortgage application with lenders that fit your criteria. Once you have a few loan estimates in hand, use the best one to negotiate with the lender you want to work with.
The loan officer may lower your rate, help you save on closing costs or offer other incentives to get you onboard. In early 2022, one-third of homebuyers negotiated their mortgage rates and many were able to get a better deal, according to research from Fannie Mae.
Nearly 90% of homebuyers choose a 30-year fixed mortgage term because it offers the most flexibility and monthly payment affordability. Payments are lower because they’re stretched over a longer timeline, but you can always put more toward the principal here and there. But when you take out a longer-term home loan, “you’re holding up the lender’s money, and there’s an opportunity cost for the funds to be invested elsewhere,” Rueth said.
Shorter loan terms (10-year and 15-year mortgages) and ARMs have lower interest rates, giving you the option of reducing your rate now.
Choosing a shorter repayment term could help you save money since you’ll be paying less in interest over the long term. But don’t make the homebuying mistake of choosing a shorter loan term just for the lower rate. Because you’ll have less time to pay back the money you borrow, shorter loan terms break down to higher monthly payments, and you’ll need to make sure those fit within your budget.
In short, yes — but it’s all relative.
“In today’s market, 6% is a great rate compared to the historic average of a little over 7%,” Rueth said. “However, 6% no longer looks good because homeowners were spoiled by 2.75% mortgage rates a few years ago.”
Homeowners are also feeling the burden of steep home prices, making those high rates hurt even more.
But you can save money on your mortgage by taking some (or all) of these steps. Improving your credit score, increasing your down payment, buying points and negotiating your rate may help bring your rate from 7% down to 6%, or even lower.
Source: cnet.com
The Mortgage Bankers Association said its Market Composite Index moved lower last week, apparently indifferent to a slight improvement in mortgage interest rates. The Index, which measures loan application volume, decreased 0.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index declined 0.4 percent compared with the previous week.
The Refinance Index decreased 2.0 percent from the previous week and was 9.0 percent lower than the same week one year ago. The refinance share of mortgage activity accounted for 30.8 percent of total applications compared to 31.2 percent the previous week.
The Purchase Index ticked down 0.2 percent both before and after its seasonal adjustment. It was 16.0 percent lower than the same week one year ago.
“Mortgage application activity was muted last week despite slightly lower mortgage rates. The 30-year fixed rate edged lower to 6.93 percent, but that was not enough to stimulate borrower demand,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications were essentially unchanged, as homebuyers continue to hold out for lower mortgage rates and for more listings to hit the market. Lower rates should help to free up additional inventory as the lock-in effect is reduced, but we expect that will only take place gradually, as we forecast that rates will move toward 6 percent by the end of the year. Similarly, with rates remaining elevated, there is very little incentive right now for rate/term refinances.”
Additional Highlights from the MBA Weekly Mortgage Application Survey
Source: mortgagenewsdaily.com
Looking for the most up-to-date mortgage rates to empower your purchasing or refinancing decisions? We’ve got you covered.
Here, you can view today’s mortgage interest rates, updated daily according to data from Bankrate, so you can have the most current data when purchasing or refinancing your home.
30-year fixed rate mortgages
The average mortgage interest rate for a standard 30-year fixed mortgage is 6.91%, an decrease of 0.05 percentage points from last week’s 6.96%.
Thirty-year fixed mortgages are the most commonly sought out loan term. A 30-year fixed rate mortgage has a lower monthly payment than a 15-year one, but usually has a higher interest rate.
15-year fixed rate mortgages
The average mortgage interest rate for a standard 15-year fixed mortgage is 6.42%, a decrease of 0.07 percentage points from last week’s 6.49%.
Fifteen-year fixed rate mortgages come with a higher monthly payment compared to its 30-year counterpart. However, usually interest rates are lower and you will pay less total interest because you are paying off your loan at a faster rate.
5/1 adjustable rate mortgages
The average rate on a 5/1 adjustable rate mortgage (ARM) is 6.63%, an increase of 0.12 percentage points from last week’s 6.51%. With an ARM, you will most often get a lower interest rate than a fixed mortgage for say, the first five years.
But you could end up paying more or less after that time depending on your loan terms and how that rate follows the market.
What is the best term for a loan?
When picking a mortgage, it is important to pick out a loan term or payment schedule. Usually you will be offered a 15 or 30-year loan term, but it is not uncommon to see 10, 20, or 40-year mortgages, according to CNET.
Mortgages can be fixed-rate or adjustable-rate. Interest rates in fixed-rate mortgages are set in stone for the duration of the loan.
Adjustable-rate mortgages only have interest rates set for a certain period of time before the rate adjusts annually based on the market.
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Source: nj.com