Best 30 Year Mortgage Rates today
When purchasing a home, one of the most confusing aspects of the process is selecting a loan. There are many different financial products to choose from, each of which has advantages and disadvantages. The most popular mortgage product is the 30-year fixed rate mortgage. This article discusses how the 30-year compares to other mortgage products, benefits of the 30-year, and fess to avoid when selecting a 30-year mortgage.
Comparison to Other Mortgage Rates
When selecting a mortgage, there are many different mortgage products and terms to choose from, each of which has different interest rates. While 30-year fixed rates are near an all-time low, and were recently below 5%, they are still higher than other options. 30-year rates can be compared to the following popular products:
- 15-year Fixed Rates – 15-year fixed rates are normally lower than a 30-year and, depending on the lender, the interest rate variance ranges from 0.50% to 0.75%. These rates are often lower because having a shorter term provides significantly less risk to the lender. Although interest rates are lower, 15-year payments are higher than 30-year payments because the loan has to be paid off in half the time.
- Adjustable Rate Mortgage (ARM) – An ARM often comes with interest rates well below those of a 30-year. With an ARM, a borrower receives a very low fixed interest rate for a period of time, which normally ranges form 1 to 7 years, before the rate adjusts to a higher level. Normally, the shorter the initial low interest period is, the lower the interest rate is. The most common ARM product is the 5-year Adjustable Rate Mortgage, which commonly comes with an interest rate 1% less than a 30-year.
- Interest Only Mortgages – While they are not as frequently offered today as in years past, many borrowers still opt for interest only mortgages. Since interest only loans do not require principal payment and do not amortize, the balance due never decreases. Because of this, lenders assume a lot more risk and often require a sizable down payment and charge higher interest rates. Interest only mortgage rates are commonly 1% higher than 30-year rates.