I Google “mortgage” or “mortgage rates” and see ads an entries for mortgages for as low as like 3.25%. Is this possible? The major banks are nearing 5%, but 4 or lower is a big deal. Anyone know if this is real? Or is this just something they can do (somehow) to get you to click?
Oh, and let’s assume we’re talking about someone with excellent credit and owns a few properties?
Thanks.
It depends a lot on whether it’s a fixed or variable rate mortgage. The latter will have a lower rate. Variable rate mortgages are different as well. Some reset yearly some only every three or five years. Latter will generally have higher rates.
Term matter as well. A 15 year mortgage will have a lower rate than a 30 year.
Sometimes, there is also a teaser rate good for 5 years before it rises to something else.
There are certainly sub-5% loans out there.
I don’t have a specific answer to your question but 3.35% is not enough to define the mortgage in the US. There is another cost called points which is extra money in the loan that isn’t used for buying the house. Say you spend $100,000 on a house. With one point your loan will be for $101,000 the extra $1000 is the point. You can trade points vs. interest rate to some extent. So 3.25% mortgage may have 2,3 or maybe four points.
Yes, I was aware of that. But I’m more concerned with the cost over the next 15, 20 30 years than I am the hit right now.
I just closed on a 30 year fixed 4.25% loan at the end of December. It is my first time buying a home, but my credit score is over 800. Then again, I didn’t go online to get my loan. I went through a mortgage broker.
ETA: the rate was actually offered at 4.19%, but points bumped it up to the 4.25%. The difference paid the broker.
Our mortgage which we got a year and a half ago is 2.89% for five years, and we’re still seeing mortgages advertised for basically the same rate around here. For what that’s worth.
Are you only interested in the United States? The prime rate in Canada is 3% right now, so it’s unlikely you’d pay much over 5% at any bank here. For example, come up to Montreal and get 3.690% for the next five years, fixed. (Disclaimer: I don’t work for BMO, but I do have my mortgage with them.)
Edited to add: OK, I just checked, and the highest rate at BMO is an 18-year open mortgage at 8.850%. The majority of their rates are mostly below or near 5%.
Using a broker costs you money, so if you are trying to emphasize that a broker is more cost effective, it isn’t.
Dealing direct with the lender is the most cost efficient way to go, and some lenders offer on-line discounts. Go to a broker = pay someone to do legwork for you.
RE: Adjustable rate mortgages (ARM): to people with excellent credit, the have been easy to come by for the past two years at sub 4% rates. They are about as dumb a move as one can make, considering interest rates (and eventually the ARM) can only go up (well, in light of record low interest rates). Makes sense if you won’t be in the house more than a few years.
15-year loans: While a 30-year conventional mortgage of 4.25 to 4.75 has been common in the past 18 months, a 15-year loan would be even cheaper, provided the other bits (such as credit, home value, equity, etc.) were in order.
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FWIW, I’m currently paying 2.625% on mine – 18th year of a 30-year FHA adjustable. Adjustments are limited to once per year, and can’t move more than 1% per year, max of 5% over the life of the mortgage. When I got it in '93, it was at 5.5%, so I can never pay less than 0.5% or more than 10.5% interest.
I refinanced my house through my credit union in November. The loan is at 3.5% for 15 years.
ETA: The original loan, from WAMU in September 2003, was 30 years at 5.325%.
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Its the same. Basically, when you pay points it’s the same as borrowing less money. Of course you have lower monthly payments on the loan, you are borrowing less money.
You got lucky.
Recent rates/trends: Taking out an ARM for a long-term investment when rates are hovering about 4% = not wise.