15-Year Term Preferred for Government Repo and Other Homes

By: Joseph Smith

More and more fixed-rate 15-year mortgage loans are being taken out this year to finance purchases of new homes, government repo homes and other homes and to refinance loans, according to San Francisco-based real estate research company First American CoreLogic.

In February, the number of fixed-rate 15-year mortgage loans increased to 74,497 loans from the January total of 42,178 loans.

Data from Bloomberg also supported First Americanís findings. Bloomberg released data showing the issuance of a total of $15.9 billion in 15-year mortgage loans to refinance loans or to buy government repo homes and other types of homes in March. The figure is more than twofold the $7.5 billion worth of similar mortgage loans issued in February.

LendingTree economist Cameron Findlay said that the 15-year trend has continued in April and will rise in May.

Mortgage lenders and brokers contend that many members of the baby boom generation want to take advantage of the record low mortgage rates and want to complete their mortgage payments more quickly so that they can enjoy their retirement years. They also do not want to be concerned with government repo problems or other types of foreclosure problems during their golden years.

Also, borrowers who prefer 15-year mortgage loans want to save interest payments on their loans. A 15-year $400,000 mortgage loan would eliminate 180 months of interest payments from the duration of the loan, resulting in total savings of $194,000 if the recent average rate of 4.375 is applied.

The only disadvantage is the high monthly mortgage payments that the borrowers have to bear every month. The mentioned $400,000 loan would require borrowers to pay around $3,034 every month, compared to the estimated $2,056 monthly loan payments if the loan is taken out on a 30-year term with a rate of 4.625 percent. The monthly payments will also increase after insurance, property taxes and other costs are added.

Freddie Macís spokesperson Brad German said Freddieís economists have not yet compiled data concerning types of mortgages taken out for the refinancing of loans or purchase of government repo homes and other types of homes. But he said anecdotal evidence showed that 15-year mortgage loans increased in recent months as borrowers took advantage of the Obama administrationís Making Home Affordable program and the record low mortgage rates.

In addition, Bruce Hirschfeld, president of New Jersey-based Montvale Mortgage, said that 15-year mortgage loans insured by FHA have been more popular than conventional loans in the refinancing of loans or the purchase of government repo homes and other types of homes.

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Joseph Smith has been educating buyers on the finer points of Government Repo purchase at BankForeclosuresSale.com for over five years.

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