The average mortgage rate in United States currently is 3.5%. The fixed mortgage rate for 30 years is 3.86% and for 15 years in 3.15%. Most people who have not undertaken a mortgage loan would be curious to know about what is FRM or fixed mortgage rates. The other names for these loans are “vanilla wafer loans.
What are they all about?
These mortgage rates are known as fixed as the interest rates paid by the owners remains constantly fixed for the entire loan duration. The interest rates do not fluctuate like the floating or adjustable mortgage rates. The person thus is indifferent to the fluctuating mortgage rates in the loan market and enjoys a fixed repayment amount for its entire mortgage loan period. Here the Fixed Mortgage Rates are not fixed to an index. The interest rate is fixed well in advance and is usually incremented by ¼ or 1/8 %. Here the mortgage loan owner can also plan his budget well in advance and pay his mortgage repayment amounts in a timely manner.
Why are they so popular?
The popularity of fixed mortgage rate can be credited to the vast efforts of FHA or US Federal-Housing Administration which standardized the rates and offered it as an alternative solution to balloon mortgage payment plan. The payment pattern of the balloon mortgage was such designed which made the loan owners pay a large amount at the end of their loan payment tenure. However most homeowners were unable to make this payment and this lead to large scale foreclosure and many homeowners lost their homes to. But in the case of fixed mortgage rates the payment pattern was same for every month and this continued till the last month in the mortgage repayment plan.
What is the duration of these loans?
The fixed mortgage loans are very classical in nature and can be undertaken under two major groups mainly. These loans can be taken for 15 years and 30 years. In certain case loans for shorter period is also available but the 15 years and 30 years loans are popular among American homeowners.
What are the natures of these loans outside USA?
Fixed mortgage loans are not quite popular in countries outside USA. In most cases the fixed mortgage loans are not available for long term loans and are just available for short duration loans. In Canada for instance the fixed mortgage loan is available for loan duration of which are for 10 years. Here the average mortgage loans are for 25 years. In United Kingdom the fixed interest rate for mortgage loans is not popular. Here homeowners prefer the popular variable rate mortgages. This variable rate mortgage is popular as it reduces the interest rate in the long run.
Are these rates more expensive?
Mortgage loan experts would point out the fact that fixed mortgage rates are more expensive than mortgage rates which are adjustable in nature. In most cases they have a higher interest rate at the beginning of the loan period.
American Community Survey undertook a study recently and the results from the studies indicated that one out of every three Americans stay in a home for which they have paid their mortgage loans. When discussing about mortgage rates, you have to understand that there are of two variations. The Fixed mortgage rates have a fixed higher interest rate which is consistent throughout the loan repayment pattern. The adjustable mortgage rates which fluctuates periodically depending on the mortgage rate currently in the market. Here the Average Mortgage Rate is calculated generally.
How are these interest rates determined?
The main banks of a company determine the interest rates which need to be paid by a mortgage home owner. In USA there is a special forum which holds monthly meeting every 8months and studies the economy conditions of the country. Based on these facts the interest rate is set. People who are part of this forum are important people from Federal Reserve Bank and Federal Reserve Board. The forum is commonly known as the Federal Open-Market Committee.
What do you understand about the Federal Reserve?
The standards for most monetary policy in United States are set by the Federal Reserve. In USA they are around 12 Federal Reserve Bank unites and they are distributed in important US cities. Here they are under the reviews of Congress but they can take independent decisions regarding the country’s economy. The Federal Reserve earn money for the country through various interest collected in loans, dividends earned on foreign currency and various interests earned thru governmental loans.
How do you calculate the interst rates?
When the Federal Open-Market Committee has their monthly meetings they study the current economy situation of the country and also judge the liquidity that is available for funds. Here the basic formula is when the circulation of money in the country’s economy is abundant, the rates would increase and when it is in bad shape the rates would decrease. Here the rates would be calculated on a average basis. The main objectivity of these people is to keep the country’s economy stable and the employment scenario full.
What roles does the central bank play here?
When understanding about average mortgage rates, you have to understand that the central bank loans the money to the local retail banks at an interst rate which is largely discounted. The ordinary home loan owner takes the loan at an interest rate which is based on the amount of loan he undertakes and the duration of the loan. A common tactics undertaken by central bank would be to increase the average mortgage rates when they feel that they should deposit money and use the money for other purposes. The same bank would lower rates when they want the consumer to increase their spending.
What are the average mortgage rates?
The average mortgage rate would depend on the borrower’s current credit score, the first down payment that he has made and the specific loan variation that he has taken. The average mortgage rate currently for 30 years is 4.19%. For 15 years the rate is 3.34%. In both cases the rates are fixed mortgage rates.
In United States the Federal-Reserve decided to invest in securities which had been mortgaged earlier. These decisions lead to fall in mortgage rates and also opened up new options for many. One of the most common options that many homeowners selected was to refinance their existing home mortgage. What does refinancing mean? Refinancing can be defined as undertaking a new mortgage loan and replacing the old one. The same lending company or a new one can refinance your home loan mortgage. In order to prevent yourself from taking a hasty decision it is necessary for you to understand whether refinancing at a 15 year rates would be convenient for you.
When should you refinance?
Enjoy a low interest rate
Financial experts recommend homeowners to select 15 Year Refinance Rates when the monthly mortgage rates are lower than what they had paid earlier when the home was financed. The homeowner also has the option to select a mortgage rate which is adjustable in nature. This would help the homeowner enjoy a low monthly interest rate which would create a low monthly payment plan for him. Sometimes when undertaking the refinance option homeowners might shorten the mortgage loan duration and also opt for cash out equity. With the low monthly repayment plan, the homeowner would use the saved money on other appropriate expenditures like education fund or retirement schemes.
Create equity quickly
The financial conditions of many homeowners change over a period of time. Thus when they are promoted with a better salary or enjoy an inheritance, they are in a position to pay higher monthly repayment rates. Thus the homeowner would analyze and change from a 30 year mortgage plan to 15 year refinance rates. By doing this the money spent on financing fees is saved and equity is built quickly too. Here it is essential that you speak to your financial planner and understand if your loan has pre-penalty clauses or not.
Select a different loan program
Selecting an adjustable mortgage rate is very common among people opting for refinancing. But here you have to understand that the rates might fluctuate and you might in the end pay a few thousand dollars more, than needed. The best thing to do here is to select a fixed rate which is stable and this would keep your worries away too.
Manage your credit scores well
If you pay your monthly repayment installment for your mortgage loan on time, your credit score will get better. In fact many homeowners opt for home refinancing of 15 years due to this and thus reduce their payment pattern duration. Also the interest rate on the new loan is low.
Using cash-out refinancing
Sometimes homeowners undertake debt consolidation. This is done with the help of cash-out refinancing procedure where the homeowner using its good credit score can also pay the credit card dues. The process is similar to refinancing process.
15 Year Refinance Rates Chase Jumbo Interest Rates 15 year Refinance Rates Graph