Is this a large gap in mortgage rates?

[Acesanders]

I was quoted the dollowing rates today. These are all fixed rates:
30 years @ 4.125%
20 years @ 3.75%
15 years @ 3.25%

These are partly fixed rates:
15 yr rate/30 year loan 3.875
7 yr rate/30 yr loan 3.375

The gap between 30 years and 15 years is almost a full percent, is that a large gap? Typical? Obviously this isn't an error and banks have a reason for doing this, but I thought the difference between a 30 and 15 year mortgage was closer to a 0.5% gap. Does this make the 15 year much more attractive over the 30 or is it all relative and exactly the same thing in the long run?


[i] are these competitive rates for the state of Pennsylvania (south central, a bit north of Lancaster) or should I be shopping around more than I have to find these? Thanks

[snafu]

Mortgage rates fluctuate because the different financial institutions, even specific branches have the authority to adjust rates to increase numbers to meet targets. Mortgages are no longer limited to brick and mortar type, there are electronic businesses offering mortgages. Have you consulted a Mortgage Broker?

The client's FICO score, employment record/stability and other, fluid factors set the final rate. With general interest rates so low I suspect the banks anticipate lots of increases in interest rates between 2014 - 2044.

[dawnwes]

In the years we have been buying and refinancing, the difference between a 15 year loan and a 30 year loan has been right around 1% difference. That sounds about right to me.

[Acesanders]

In the years we have been buying and refinancing, the difference between a 15 year loan and a 30 year loan has been right around 1% difference. That sounds about right to me.

this gap is only 0.875% different. So this alone would not be a large enough gap to stretch for the 15 year over 30 year, is that correct in what you are saying? I thought maybe the 15 year was such a better rate due to (what I thought was) a large rate difference, but this now sounds like it is within normal ranges and both are about where people expect them to be. do I have that correct?

[feh]

this gap is only 0.875% different. So this alone would not be a large enough gap to stretch for the 15 year over 30 year, is that correct in what you are saying? I thought maybe the 15 year was such a better rate due to (what I thought was) a large rate difference, but this now sounds like it is within normal ranges and both are about where people expect them to be. do I have that correct?

Are you choosing between 15 and 30 years based on the current difference in interest rates compared to what the "average" difference is?

If so, why?

[Eagle]

I was quoted the dollowing rates today. These are all fixed rates:
30 years @ 4.125%
20 years @ 3.75%
15 years @ 3.25%

These are partly fixed rates:
15 yr rate/30 year loan 3.875
7 yr rate/30 yr loan 3.375

The gap between 30 years and 15 years is almost a full percent, is that a large gap? Typical? Obviously this isn't an error and banks have a reason for doing this, but I thought the difference between a 30 and 15 year mortgage was closer to a 0.5% gap. Does this make the 15 year much more attractive over the 30 or is it all relative and exactly the same thing in the long run?


[i] are these competitive rates for the state of Pennsylvania (south central, a bit north of Lancaster) or should I be shopping around more than I have to find these? Thanks

Seems about right to me. When we bought last year the difference between a 30 year and 15 year was a little less than a percent. We decided to go with a 30 year note and pay it off early. Currently, we're projecting to pay off the house in 17 years instead of 30.

I found this website via google: http://www.mortgagecalculator.org/

A 200k loan assuming 0 down at 4.125% interest for 30 years with a property tax of 1.25% and PMI of .5% starting this month (Sept 2014) would be:

Monthly payment: $1,177.63
Total interest paid: $139,364.47
Total Tax Paid: $75,000.00
Total PMI Paid: $9,583.33
Monthly PMI: 115 payments of $83.33 each
Total of 360 Payments: $423,947.81
Pay off Date: Aug, 2044
PMI Pay-Off Date: Apr, 2024

A 200k loan assuming 0 down at 3.25% interest for 15 years with a property tax of 1.25% and PMI of .5% starting this month (Sept 2014) would be:

Monthly payment: $1,613.67
Total interest paid: $49,377.42
Total Tax Paid: $37,500.00
Total PMI Paid: $3,583.33
Monthly PMI: 43 payments of $83.33 each
Total of 180 Payments: $290,460.76
Pay off Date: Aug, 2029
PMI Pay-Off Date: Apr, 2018

[Eagle]

A 200k loan assuming 40k down payment at 3.95% interest for 30 years with a property tax of 1.25% and PMI of .5% starting this month (Sept 2014) would be:

Monthly payment: $967.59
Total interest paid: $113,333.45
Total Tax Paid: $75,000
Total PMI Paid: $0
Monthly PMI: N/A
Total of 180 Payments: $348,833.45
Pay off Date: Aug, 2029
PMI Pay-Off Date: N/A

The differences between the two loans above with the 40k down payment (or 20% down payment) are $210.04 a month, savings of $9,583.33 in PMI, and savings of $26,031.02 in interest.

By paying this loan bi-weekly (every two weeks) instead of monthly it would mean an additional $17,462.97 saved in interest!

[bigdaddybus]

Here are todays rates from a mortgage broker I have used in the past. This is also a place that has flat fees for closing costs so that can save you considerable cost when compared to lenders that set their costs according to the size of the loan. All mortgages I that I have recieved from this broker have been sold to Wells Fargo.

All fixed rate
30yr 3.75%
20yr 3.5%
15yr 2.875%
10yr 2.675%

all with 20% down and good credit

I suggest looking into local mortage brokers. My last mortgage was free as I have referred my local mortage broker so much business.

[disneysteve]

Does this make the 15 year much more attractive over the 30 or is it all relative and exactly the same thing in the long run?

What makes the 15 more attractive is that you pay off the property in half the time and save tens of thousands of dollars in interest. If you can afford the 15, go for it. The interest differential really shouldn't matter.

[dawnwes]

I think .87% is close to 1%.

However, I have no idea what you are really asking. The rate between the two will make a difference, but the real difference is in paying it off in 15 years vs. 30 years as others have stated.

this gap is only 0.875% different. So this alone would not be a large enough gap to stretch for the 15 year over 30 year, is that correct in what you are saying? I thought maybe the 15 year was such a better rate due to (what I thought was) a large rate difference, but this now sounds like it is within normal ranges and both are about where people expect them to be. do I have that correct?