New Jersey Borrowers Learn the Secret to Getting the Lowest Payment AND Lowest Mortgage Rate – Updated Tuesday, January 17, 2012

Mortgages come in all different shapes and sizes.  There is no one mortgage for everybody. The goals and needs of each individual New Jersey applicant will determine what program is best and the least costly.

Probably the biggest piece of misinformation about mortgage interest rates is that the 30-year fixed is the lowest rate a lender can offer.   Not true.  In fact, the 30-year fixed rate has the highest cost of all programs.

Why?  Because stop and think of the guarantee you’re getting.  When you buy a home with a 30-year fixed rate, you are asking the lender to loan you a sum of money for 30 long years AND to guarantee that you can pay a certain rate for the entire while.  So, given you want such a long guarantee means you must pay more for that rate.

These are the (3) most popular types of mortgage loans in New Jersey:

  1. 30 year fixed: For those who believe they will be in their homes for many years (6 or more years at least) and/or need the security of a long-term rate despite the higher rate and payment.
  2. Interest Only: Best for those who want the option to pay a lower amount each month in the form of interest only. Any amount greater than the interest can be paid each month.
  3. Adjustable Rate Mortgages (ARMs):  These start with a fixed rate for several years.
  • A 3/1 ARM has a lower fixed rate than a 30-year fixed. The rate is guaranteed not to change for the first 3 years. Based on LIBOR index.
  • A 5/1 ARM has a lower fixed rate than a 30-year fixed. The rate is guaranteed not to change for the first 5 years. Based on LIBOR index.
  • The 7/1 ARM also has a lower rate than a 30-year fixed. The rate is guaranteed not to change for the first 7 years. Based on LIBOR index.

Here is how CONVENTIONAL mortgage rates compare for these products as of January 17, 2012 at 10 AM:

  1. 30-year fixed @ 0.00 points – 3.990 (apr 4.189%) – This rate and payment MUCH higher than the ARMs below
  2. 15-year fixed @0.00 point – 3.250% (apr 3.407%)
  3. 3/1 ARM @ 0.00 points – 2.500% (apr 2.611%
  4. 5/1 ARM @ 0.00 points – 2.750% (apr 2.887%)
  5. 7/1 ARM @ 0.00 points – 3.000% (apr 3.225%)

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Rates and programs subject to change on a daily basis. Call or email subscribe for updates. Most loans carry the option for you to pay or not pay “points.”  Paying points will make your rate lower.   “1.00″ point is equal to one percent of your loan amount.

Rates above based on minimum $200,000 loan amount (max $417,000), conventional loan, owner occupied home (non-condo), mid credit score of 720 or higher, fully documented income, no cash out, taxes and insurance escrowed, minimum 20% equity. Based on a 30-day closing.  Loan details that vary from this might have a higher rate.  Please inquire about program rates for FHA and VA loans in New Jersey.

And don’t forget, many borrowers have a 30-year fixed rate mortgage ONLY because that’s what they always hear about. AND people falsely believe that the 30 year fixed is the lowest rate.

On the contrary, the 30-year fixed rate is the highest interest rate on the charts.

When deciding on a mortgage, first consider how long you will be in the mortgage or in that home. The average New Jersey borrower will refinance or move within 5 to 7 years.

Ring me with questions…… (856) 728-7100

 

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