Compare Interest Only Mortgage Rates and Lenders
Review current interest only mortgage rates for April 30, 2017 and get personalized mortgage quotes from top lenders
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Mortgage Rate ReportSunday, April 30, 2017
After holding steady for the past two weeks, mortgage rates inched higher on the week although rates remain highly attractive for borrowers. Despite the Fed's decision to raise interest rates in March and its more hawkish forecast for 2017, mortgage rates had actually dropped significantly since the Fed's announcement and hit their low point for the year last week before moving slightly higher.
Mortgage rates jumped .250% to .375% in advance of the Federal Reserve's meeting as most lenders factored the rate hike into their mortgage rate pricing before the Fed's official announcement. In the weeks following the Fed's decision, the mortgage market settled down with mortgage rates falling .375% to .500% across all mortgage programs. Enhanced clarity into the Fed's decision-making process and a rebound in the bond market amidst global geopolitical uncertainty helped push mortgage rates lower and stabilized the market after after weeks of turbulence.
Mortgage rates climbed moderately on the week with the interest rate for a 30 year fixed rate mortgage up .125% to 3.875% while the interest rate for a 15 year mortgage moved to 3.000%. The interest rate on a 5/1 adjustable rate mortgage (ARM) also increased .125% to 2.875%. VA and FHA mortgage rates also moved higher but continue to be highly appealing for home buyers seeking low down payment options with FHA and VA mortgage rates both sitting at an attractive 3.375%. Non-owner occupied mortgage rates were not exempt from the market's gravity and rose .125% to 4.125%. Jumbo mortgage rates bucked the trend for the week and remained at 3.875%, consistent with the interest rate for a conforming 30 year fixed rate loan.
After touching their low for the year, mortgage rates moved higher but remain relatively stable this week despite signs of growing economic momentum that appear to be influencing the Federal Reserve's decision making. The positive domestic economic news has recently been offset by increasing global turmoil which pushed bond prices higher while moving mortgage rates lower. Positive signs from the housing market over the past week, however, may have provided the catalyst for the increase in rates.
Although the past several weeks prove that interest rates are impossible to predict, the Fed’s decision to raise the federal funds rate and its more aggressive forecast signal that mortgage rates are likely to rise over the course of 2017, potentially at an increased pace. 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 are unpredictable 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