Compare Interest Only Mortgage Rates and Lenders
Review current interest only mortgage rates for June 24, 2017 and get personalized mortgage quotes from top lenders
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Mortgage Rate ReportSaturday, June 24, 2017
Mortgage rates stabilized and continue to remain near their low for the year despite the Federal Reserve's decision to raise the its key federal funds rate .250% in its June meeting. The Fed pointed to labor market strength as well as improved household spending and business investment in deciding to raise the target range for the federal funds rate to 1.000% to 1.250%. The Fed also noted relatively low inflation, including a recent decline, in explaining its decision to raise its target interest rate.
Perhaps because the Fed's rate hike action was so widely anticipated, mortgage rates were mostly unchanged following the Fed's announcement, which is certainly a relief for borrowers as purchase and refinance activity continues to gain momentum.
Instead of following the Fed's lead and climbing, mortgage rates were stable across the board as compared to last week. The interest rate for a 30 year fixed rate mortgage remained at 3.750% while the interest rate for a 15 year mortgage held steady at 2.750%. The interest rate on a 5/1 adjustable rate mortgage (ARM) also stayed put at a low 2.750% as lenders seek to pull borrowers into shorter-termed loan products. FHA and VA mortgage rates were both unchanged at 3.250%, remaining appealing for home buyers seeking low down payment loan options.
Bucking the trend, Jumbo mortgage rates increased .125% to 3.875% and non-owner occupied also rose .125% to 4.125%.
After a relatively turbulent first quarter of 2017, mortgage rates have been relatively stable and attractive for much of the past two months. The trend looks to continue as we move deeper into June, especially in light of mortgage rates' non-reaction to the Fed'smove. We are approaching six weeks of relatively stable mortgage rates that have brought a sense of calm and increased certainty to the marketplace for both borrowers and lenders.
Although recent events reinforce that mortgage rates are impossible to predict, the Fed’s decision to increase the Fed Funds rate and the pullback in mortgage rates over the past month does not change the expectation that rates are likely to rise over the course of 2017, potentially at an accelerated pace. In fact, the Fed reaffirmed its outlook for one more rate increase in 2017. Prospective borrowers looking to buy a home or refinance may be able to lock in a lower interest rate by acting sooner rather than later, before mortgage rates go up again.
Because interest rates fluctuate daily, we continue to actively monitor the mortgage marketplace for changes. Borrowers should check the FREEandCLEAR mortgage rate tables regularly to review customized, updated mortgage rates for lenders in their area. Our rate tables are free to use and require no personal information.
Why Select an Interest Only Mortgage
Lowest Initial Monthly Payment.
With an interest only mortgage you pay only interest and no principal during the for the first 3, 5, 7 or 10 years of the loan, which is called the interest only period. Additionally, your interest rate is fixed and does not change during the interest only period. Because you are not paying principal during the interest only period, your monthly payment is lower than the payment for an amortizing loan such as a fixed rate mortgage or an adjustable rate mortgage (ARM), when the borrower pays both principal and interest. The flipside is that at the end of the interest only period, your payment increases because your are required to start paying both principal and interest for the remainder of the loan term, which is usually 30 years. Plus, your interest rate can potentially increase during this period of the loan which would cause your payment to go up even more.
Larger Mortgage Amount.
The lower initial monthly payment provided by an interest only mortgage enables borrowers to afford a higher loan amount and buy more home. Being able to afford for a larger mortgage is one of the main benefits of an interest only mortgage. Borrowers who are enticed by the lower payment and higher mortgage amount offered by an interest only mortgage should also be aware of the possible payment shock in the future. Borrowers need to make sure that they can afford their monthly payment both at the beginning of the mortgage and over time when their payment is highly likely to increase.
Pay Down Principal on Your Terms.
An interest only mortgage enables borrowers to pay down principal based on their schedule as opposed to on a scheduled monthly basis like with a fixed rate mortgage or ARM. Borrowers can elect to pay down principal during the interest only period of the loan, even though they are not required to. When you pay down your principal mortgage balance during the interest only period, your required monthly payment also goes down. The flexibility to pay down principal when you want to makes interest only mortgages well suited for individuals who earn a modest monthly salary but a significant annual bonus. Borrowers in this position benefit from the lower monthly mortgage payments but can use a portion of their bonus to pay down their principal loan balance.
Your Are Going to Own Your Home for a Shorter Time Period.
If you know that you are only going to own your home for the length of the interest only period, then an interest only mortgage may be the right option for you. That way you benefit from the lower monthly mortgage payment during the initial interest only period but you are not exposed to an increase in monthly payment and possibly interest rate at the end of the interest only period when the loan starts to amortize. Keep in mind that with an interest only mortgage, you do not pay down your loan balance during the interest only period and therefore build no equity in your home unless your property value increases.
Why Borrowers Compare Mortgage Rates on FREEandCLEAR
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More FREEandCLEAR Mortgage Resources
Our Interest Only Mortgage Calculator enables you to determine your initial monthly payment and worst case scenario for an Interest Only Mortgage using current interest rates
Review our comprehensive overview of how an interest only mortgage works including key loan program terms
Interest only mortgages are the riskiest type of mortgage. Borrowers should review the risks of an interest only mortgage to make sure they understand the serious downsides
Review the pros and cons of the three main types of mortgages (fixed rate, adjustable rate (ARM) and interest only) to select the mortgage type that is right for you