A new report from Bills.com revealed that 15-year mortgages, not traditional 30-year mortgages, were the most sought after loan type in the third quarter.
In fact, they were also the most requested loan type in the second quarter as well, which is a departure from the norm.
The money-saving site noted in its 2011 Third Quarter Mortgage Report that 34 percent of consumers preferred 15-year fixed mortgages, followed by 32 percent who opted for 30-year mortgages.
Interestingly, the numbers were actually quite a bit lower than the second quarter, when they were 38 percent and 26 percent, respectively.
I kind of wonder why the 15-year fixed waned in popularity somewhat, given the fact that mortgage rates have dropped even more quarter-to-quarter.
One could argue that it would be easier to take on a shorter mortgage term now that rates are lower, but perhaps consumers like the idea of snagging a 30-year fixed in the 3% range. You can’t really argue with that either.
Regardless, it’s still very surprising that borrowers are opting for 15-year mortgages above all else, though the nature of the Bills.com site (saving money) may have something to do with that.
This survey may not represent the population as a whole, only frugal money-saving types.
Majority of Homeowners Looking for Lowest Interest Rate
About a month ago, I noted how 15-year mortgages could save you a ton of money, assuming you actually want to pay your mortgage off early.
And it’s good to see that the majority (39%) of consumers polled said the lowest possible interest rate was the most important factor when choosing a loan type.
This is in stark contrast to the sentiment during the housing boom, when paying the lowest amount possible every month was en vogue (option arms), as home price appreciation would be your home equity builder.
Remember, while a lower mortgage payment can “save you money,” it’ll mean more interest will be paid through the life of the loan, so it’s important to look at the big picture.
Speaking of, 72 percent of borrowers plan to stay in their homes for more than seven years, which explains why the lowest interest rate possible is on their radar.
But if you only plan to stay in your home for a short period of time, your focus should be more on mortgage payment, and you may even be able to make the argument to go with a hybrid ARM, one that’s fixed for several years before becoming adjustable.
Just know that today’s record low mortgage rates probably won’t fall any lower, so refinancing your mortgage in the future likely won’t be favorable.