Home mortgage loans are becoming less expensive and amortization periods are shorter. At the same time, the variety of loan types is on the increase, providing home buyers with the best-ever selection of mortgage offerings.
In recent months, favorable terms have sparked a surge of activity by homeowners to refinance their existing mortgages.
"About 80 percent of our fixed-rate home mortgages are now refinance loans," said Sam Lyons, senior vice president for mortgage banking at Great Western Bank -- a lender with offices in 20 states.
"Considering all types of mortgage instruments, about 70 percent of our loans are now for refinancing a residence," Mr. Lyons said. "That's up from 30 percent a year ago."
Mr. Lyons also reported a substantial recent increase in requests for 15-year loan term mortgages, as opposed to the more conventional 30-year term.
"We now have $240 million in the pipeline [loans now being processed] for 15-year mortgage loans. A year ago at this time, we had only $40 million being processed for 15-year loans."
Other lenders and mortgage brokers have noted the same trend. With today's low interest rates, many homeowners can refinance their 30-year loan with a 15-year loan and pay very little more in monthly payments than they have been paying.
First Nationwide Bank also is busy processing refinance loans for homeowners, and most of those loans are for 15-year terms, according to Tom Cross, a regional sales manager.
"About 80 percent of our loans are now refinance mortgages, and the idea of paying off a home loan in a shorter time period is really catching on. Sometimes the added amount in monthly payments to achieve this shorter term is only $50 to $150."
However, many homeowners prefer a standard 30-year term mortgage loan, with the idea of making extra principal payments monthly or periodically. Using this method, they are not committed to making higher monthly payments but can receive the same benefits. If they're short on cash for a few months, they can simply postpone their extra payments.
One lender pointed out that if a homeowner pays only one additional payment on his mortgage loan per year, it will reduce the term from 30 years to 21.6 years.