Mortgage rates have risen over the past few weeks and show no signs of slowing down. Comparisons show a notable increase in interest rates for 30-year and 15-year fixed loans along with 5/1 ARM financing that has grown in popularity over the past few years.
The 30-year Fixed Interest Rate
Buying a house can be a stressful process according to AAA Credit Guide (https://aaacreditguide.com/pre-approved-mortgage/) and never more so than when mortgage rates are on the move. The average rate that new borrowers paid for a 30-year fixed loan during the month of June was 3.85 percent. Such a change is more than a 4-point increase from the prior month when interest rates were at 3.80 percent. Homeowners should expect to pay at least $470 in interest for every $100,000 borrowed at the current interest rate rise. The dollar price is at least $50 more than what borrowers who secured loans last month are paying in additional finance charges.
Increase in 15-year Fixed Financing
Homeowners who take advantage of a 15-year fixed loan can expect to pay around 3.07 percent in interest, which is at least six points more than buyers paid for financing mortgages in May. Even those who secured loans in the middle of June are paying less than borrowers who bought homes near the end of the month.
Those on a 15-year fixed mortgage plan can expect to pay $694 in interest per $100,000 borrowed. Although the amount is initially greater than that of a 30-year fixed loan, the benefit of borrowers paying their homes off in 15 instead of 30 years includes a reduction in the amount paid over the life of the loan. Homes paid for in 15 years also accumulate equity faster than those acquired via 30-year fixed mortgages.
5/1 ARM Rates
The average interest rate on a 5/1 ARM loan grew to 3.21 percent in June, which is at least eight basis points more than interest rates on mortgages granted in May. An increase in percentage rates brings the cost of a 5/1 ARM loan to $433 in financing costs per $100,000 borrowed. It is important to note that ARM loans are ideal for homeowners planning to sell their homes before the first adjustment, which leads to increased monthly payments, goes into effect. Buyers who keep loans beyond the first and second adjustments may find themselves underwater if interest rates continue to rise while the home’s value remains steady or decreases.
Many experts believe that interest rates for mortgages will continue to rise over the next few months. Some professionals in the field hold to the notion of finance charges holding steady for the rest of 2017. The uncertainty of interest rates is a sign to potential buyers that now is the best time to capitalize off lower interest rates while they remain reasonable.