Shorter term mortgages continue to gain in popularity.
That’s a pretty staggering increase, helped on by the widening spread between the largely more popular 30-year fixed mortgage and the 15-year fixed.
The spread hit a record high 0.82 percent last month, per mortgage financier Freddie Mac, whose data goes back to 1971.
Demand is apparently up because investors are more interested in those types of loans, as they tend to go to older, lower-risk borrowers.
In the latest week, the 30-year fixed averaged 4.50 percent, while the 15-year fixed came in at 3.67 percent.
Obviously, that can equate to serious savings on your mortgage interest, assuming you can afford higher mortgage payments.
Loan amount: $400,000
30-year fixed payment: $2026.74
15-year fixed payment: $2893.04
While the 15-year fixed payment is significantly higher, those refinancing may have lowered their mortgage rate two percentage points or more, making the difference in payment from a 30-year fixed to a 15-year fixed minimal.
Additionally, because these borrowers are going with a mortgage term that is half the length of a traditional 30-year fixed, the mortgage amortizes much more quickly, resulting in much less interest being charged.