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15-Year Fixed Gains in Popularity


With mortgage rates at or near record lows, homeowners are ditching adjustable-rate mortgages in favor of fixed loans, including shorter-term products like the 15-year fixed.

The traditionally less-popular loan type accounted for nearly 20 percent of refinance applications in October, according to data from the Mortgage Bankers Association, compiled by the WSJ.

That’s more than double the 9.1 percent share seen a year earlier and nearly triple the 7.5 percent share in October 2007.

The 15-year loans now account for about 20 percent of refinances at Chase, up from 10 percent a year ago.

At Wells Fargo, loan originations of 15-year fixed mortgages are up 55 percent through November compared to a year earlier.

Last week, the 15-year fixed averaged 4.32 percent, about a half-percentage point below the always fashionable 30-year fixed.

For those who can afford the larger payments, it’s a pretty good deal, as many currently refinancing are taking advantage of interest rates a point or more below their old mortgage rate.

The lower rate will partially offset the higher monthly mortgage payment associated with a 15-year fixed, and homeowners will pay down principal a whole lot quicker.

Of course, the 15-year only makes sense if you’re really interested in paying off the mortgage; for borrowers in negative equity positions, it’s probably not the most logical choice.

Others may opt to stick with the traditional 30-year fixed and attempt to earn a better return in the stock market, or bank on home price appreciation to gain home equity.

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