Current Mortgage Rates

Saturday, September 06, 2008



Some points to consider include:

* Don't stretch to purchase the largest home you can. The reason homes have contributed so significantly to many people's net worth is that you retain any price appreciation on the entire home, even though you only put down 10-20% of the purchase price. That fact has caused many people to strain their budgets and purchase the largest home they can afford, hoping the increase in the home's price will more than offset the sacrifices made along the way. Before embarking on such a strategy, be aware of all the risks. If home prices start to fall, you could end up owing more than you can sell the home for. Also, should you lose your job or your income declines, you may have difficulty paying the mortgage and other housing costs. If your budget is strained to the limit, you might not have money left over to contribute to your 401(k) plan or individual retirement account. It may be a better strategy to purchase a home you can comfortably afford.

* Don't take equity out of your home in the form of a home-equity loan or a higher mortgage balance. While lower interest rates allowed many homeowners to reduce their monthly mortgage payments, many also opted to take equity out of their homes and to stretch mortgage payments over longer periods. One of the main advantages of home ownership is that it's a forced savings plan, with part of every mortgage payment going toward equity. Resist the urge to take that equity and spend it on something else.

* Use interest rates to your advantage: Low interest rates mean lower repayments. Use this time to pay more off your loan, reducing the principal and cutting your interest payments. If rates look like climbing, consider switching to a fixed term loan. But make sure the fixed rate coincides with how long you plan to stay in the property. Fixed term loans are expensive to break.

* Use your equity to build wealth: There's not much point having thousands of dollars tied up in your home if it means missing out on good investment opportunities. Mortgage redraw lets you use the equity in your home for other investments. Most standard variable home loans and some fixed loans offer redraw - as long as you have at least 20 per cent equity in your home. And because the redraw is linked to your home loan, you pay the same low rate of interest.

* Keep your home in perspective: Your home can make you money, but in the long run it should be more than just an investment. Repairs and maintenance, insurance charges, floor coverings, additions and alterations, and agents' fees all eat up an investor's money.



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Current Mortgage Rates*

Loan Type
National Average
30-yr. fixed6.38%
30-yr. fixed jumbo7.00%
15-yr. fixed5.88%
15-yr. fixed jumbo6.50%
7/1 ARM6.25%
5/1 ARM6.00%
3/1 ARM5.88%
1-yr. ARM6.00%
1-yr. LIBOR ARM5.50%
10/1 ARM7.88%
*Mortgage Rates Updated: 09/04/2008