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(NECN: Brian Burnell) – Mortgage rates continue to fall and Americans are jumping at the chance to refinance. While many are lowering their monthly payments, more and more people are taking the opportunity to shorten the life of their loan.
How often have we heard over the past few years that mortgage rates are lower than they've been since the sixties? Well, we are there again with the lowest fixed rates under four percent.
"Rates are low. That's the good news," says Debbie Siegel of Westchester Mortgage.
And, again, people are taking advantage by refinancing their homes but this time there's a difference. A lot of people are choosing shorter term fixed mortgages paid off in 20 or 15 years rather than the traditional 30-year fixed. The shorter terms are more expensive in terms of monthly payment but cheaper over the life of the loans.
For example, a $200,000 mortgage financed over 30 years at four-and-a-half percent will cost the borrower $164,000 interest over the life of the loan. And only 26-percent of the first payment goes toward the principle. Compare that to a 15-year fixed which costs $75,000 in interest and 51 percent of the first payment goes toward the principle but the payment is $516 more a month.
Debbie Siegel is president of Westchester Mortgage and she says younger people buying their first home are still going 30 years."And the people that have been in their homes for a longer period of time and are sort of thinking about their 401k situation, thinking about retirement, have money in the stock market, they're thinking , you know what? My payment might go up a little bit but I'd rather put more of my paycheck into the equity in my house than into my 401k or into the stock market," says Siegel. Tags: mortgage rates, Brian Burnell, loan