Low mortgage rates can improve housing affordability

August 13th, 2012

There are significant differences in fixed-rate mortgage affordability.

Mortgage rates increased during the week ending August 9, but the figures are still not far off from record-low levels, according to Freddie Mac's Primary Mortgage Market Survey. This could make housing more affordable for transferees who are searching for a home.

The survey found that the average rate for a 30-year fixed-rate mortgage rose to 3.59 during the week, which was slightly higher than the previous week's figure of 3.55 percent. The 15-year FRM inched up to 2.84 percent, a rise from the previous figure of 2.83 percent. Here's a look how each of those loans would play out over time.

When calculating how much a $300,000 home will cost a transferee in this situation, the 30-year FRM will be approximately $1360 per month. For the 15-year FRM, each monthly payment will be nearly $2,050 each month.

However, over the life of the loan, a 30-year mortgage interest rate will cost a transferee far more than the 15-year loan. While this is a given, the difference in total payments is quite vast. For those who decide on a 15-year loan, they will pay a total of $368,773, while mortgage payments on the 30-year option will surpass $490,000.

Transferees may benefit from speaking to a mortgage consultant to learn more about which loan works best in their situation.