Fixed Rate

Dear Mr. Gisriel: I am getting ready to buy a home this summer. I've noticed that mortgage interest rates have fallen recently. My question is, do you recommend that I get a fixed-rate or adjustable-rate mortgage (ARM)?Lenny StablerGlen BurnieDear Mr. Stabler: The key questions are: How long do you plan to live in the home? And are you willing to risk rates going up?The interest rate on the ARM -- though cheaper initially -- has a risk of rising, unlike the fixed-rate loan. Most conventional ARMs have a lifetime cap of 6 percent and 2 percent a year -- that is, the interest rate on an ARM can rise 2 percent a year and 6 percent over the life of the loan.

Zillow says the 30-year fixed-rate mortgage continues to fall. The rate today is 3.39 percent, down from 3.43 percent a week ago. That's the lowest rate since Zillow has been tracking the data in 2008. “Last week, rates were pushed to another all-time low by the worse-than-expected employment report on Friday. This week, rates should remain fairly flat with limited scheduled news to alleviate US and European concerns,” says Zillow's Erin Lantz in a press release. For those who can afford a 15-year loan, the fixed rate is now 2.83 percent.

Fact: Since October 1998, when fixed-rate mortgages could be found at 6.5 percent -- a 31-year low -- rates have been steadily climbing. Fact: The 30-year, fixed-rate mortgage is at its highest level in more than three years, hovering around 8.5 percent. Fact: Adjustable-rate mortgages, all but forgotten 18 months ago, are flexing their muscles once again. According to Freddie Mac, the federally chartered organization that supplies funds to lenders by purchasing mortgages, 30 percent of all single-family home loans are expected to be financed through an adjustable-rate mortgage, or ARM, through the first quarter of 2000.

Prospective home buyers turn to real estate agents and loan officers when they want new homes. They rarely hire a lawyer. Diane Cipollone is trying to change that. Cipollone, an attorney with the nonprofit law firm Civil Justice Inc. in Baltimore, has worked with scores of homeowners in danger of foreclosure, and she's convinced that many could have avoided trouble by consulting with an attorney before buying their home or refinancing their loan. No one walked them through the financial implications or pointed out booby traps in the mortgage documents — until it was too late.

Dear Mr. Gisriel: I am getting ready to buy a home this summer. I've noticed that mortgage interest rates have fallen recently. My question is, do you recommend that I get a fixed rate or adjustable-rate mortgage (ARM)?Cathy StringfieldColumbiaDear Ms. Stringfield:The key questions are: How long do you plan to live in the home? And are you willing to risk rates going up?The interest rate on the ARM -- though cheaper initially -- has a risk of rising, unlike the fixed-rate loan.Most conventional ARMS have a lifetime cap of 6 percent and 2 percent a year -- that is, the interest rate on an ARM can rise 2 percent a year and 6 percent over the life of the loan.

As interest rates rise, some homebuyers are debating whether to buy now or wait for rates to come down. Others are racing to buy before rates climb further.Interest rates on fixed-rate mortgages have increased over 1.5 percentage point in the past few months. As rates go up, so does the cost of a house. Buyers who don't have the ability to pay more have several options. They can scale down and buy a less expensive house. They can switch from fixed-rate to adjustable-rate financing, which makes qualifying easier.

WITH general interest rates coming down, when can you expect relief on your loans? Variable-rate loans will drop on a schedule written into your lending agreement. Loans with fixed rates normally don't change, but might in some cases. Here's what to expect: On credit cards: Nearly half of all cards currently carry variable rates, says Robert McKinley, president of CardWeb.com.They're often tied to the bank prime lending rate, which dropped again last week. The prime rate currently stands at 7.5 percent.

When it comes to refinancing, that 30-year fixed-rate mortgage is looking as good as ever.According to a study released last week by Freddie Mac, when homeowners went to refinance in 1996, they picked the traditional mortgage 61 percent of the time if they were previously in a 30-year mortgage. Another 29 percent decided to go into a 15-year product.Freddie Mac senior economist Vassilis Lekkas said the 29 percent was the highest amount since 1993.The monthly average for a 30-year fixed-mortgage was at its lowest in January 1996 at 7.03 percent, climbed to 8.32 in June, but settled down to 7.60 at year's end.In general, when the cost of fixed-rate loans are low, borrowers refinancing do not choose adjustable-rate mortgages, Lekkas said, noting that last year just 11 percent of borrowers with adjustable-rate loans selected a new ARM when refinancing.

COULD THE MISMATCH between short-term and long-term interest rates change the way millions of Americans tap their home equity for remodeling, college tuition, autos and other big-ticket expenditures? Market forces certainly are pushing consumers in that direction, and there is evidence the shift is under way. You can refinance into a conforming 30-year fixed-rate mortgage and take substantial additional cash out for 5 3/4 percent with little or no closing costs. But a new home-equity credit line - pegged at prime plus 1 percent - would run you 7 1/4 percent to start.

It's an eyeball-grabbing number for anyone interested in real estate: Nearly 3 out of 4 homeowners who refinanced through Freddie Mac from July to October "cashed out," often walking away with thousands of dollars of tax-free money. Cash-outs are hardly new, but the proportion of refinancers using the technique to pay for consumer expenditures or investments - 72 percent - is at its highest level in more than five years. One key reason for the trend is that, compared with the spiraling costs of home-equity credit lines, fixed-rate cash-out refinancing into 30-year or 15-year mortgages look smart.

WASHINGTON - - After hitting an all-time low in early December, the average rate on a 30-year, fixed-rate mortgage rose to 5.05 percent last week and could climb to 6 percent by the end of 2010, if not sooner, according to giant mortgage financier Freddie Mac. The results are noteworthy because rates have not topped 5 percent since the last week of October, when they reached 5.03 percent, based on the results of this closely watched survey, which...

One in eight Maryland borrowers were behind on their mortgages this spring, a new report shows, a record caused by job losses and foreclosures feeding on each other in a vicious cycle. That adds up to about 132,000 homeowners who were at least 30 days late, according to a survey released Thursday by the Mortgage Bankers Association. That's up nearly 60 percent from a year ago and includes people whose lenders were trying to foreclose as of June. The country fell into recession after homeowners with risky "subprime" loans began defaulting in large numbers two years ago, sending financial institutions into a tailspin.

The economic turmoil of 2008 has left few bright spots, but here's one: Mortgage rates have plummeted. Rates on 30-year, fixed loans are hovering around 5 percent - the lowest level since Freddie Mac began tracking rates in 1971. Some economists predict a further slide in rates once Barack Obama becomes president and rolls out an economic rescue plan. And that could mean thousands of dollars in savings for Maryland homeowners. "The people who have done everything right are now going to benefit, and will be very well rewarded," said Mari Adam, a financial planner and owner of Adam Financial Associates Inc. in Boca Raton, Fla. "We are saying to our clients, anyone who can refinance should refinance.

Jail health provider purchases CMHS Hanover-based Conmed Healthcare Management, Inc., which provides health care services to county detention centers, said yesterday it had acquired Maryland-based Correctional Mental Health Services LLC for $2.2 million. CMHS provides behavioral health services to 13 counties in Maryland. The deal includes $1.8 million in cash, about 81,000 shares and assumption of certain liabilities and expenses. The transaction closed Tuesday. Andrea K. Walker Mortgage rates drop to average 6.2 percent WASHINGTON : Mortgage rates dropped this week, providing a dose of welcome news to prospective homebuyers.

Gas and food prices are rising. Wallets are hurting. But it's not all bad news. Higher prices mean the interest rate on U.S. savings bonds tied to inflation will be going up, too. The interest rate on government I bonds adjusts every six months. The next adjustment will occur Thursday, and any I bonds purchased after that will probably carry an annualized rate above 5 percent, up from 4.28 percent now. But don't wait until Thursday to buy I bonds. Buy now, and six months from now you'll be earning more than 6 percent.

For months, mortgage lenders have been backing away from borrowers with spotty credit, all but closing down the so-called subprime mortgage market. More surprisingly, they've also been increasingly loath to lend to high-end borrowers who might want to finance a high-cost home. That means doctors, lawyers, business owners and corporate executives looking for jumbo mortgages - those exceeding $417,000 - are apt to pay significantly higher interest rates than people with similar credit scores in line for smaller loans.

Q: I am buying a new home within the next few weeks with a mortgage of $100,000. I can't decide between a 1-year ARM [adjustable-rate mortgage] or fixed-rate mortgage. Can you help Marlene RobersonOwings MillsA: The major questions are: How long do you plan to live in the home? And are you willing to risk rates going up?The interest rate on the ARM -- though cheaper initially -- has a risk of rising, unlike the fixed-rate loan.Most conventional ARMs have a lifetime cap of 6 percent and 2 percent a year -- that is, the interest rate on an ARM can rise 2 percent a year and 6 percent over the life of the loan.

Some longtime homeowners like to muse about the good old days of the 1950s and 1960s, when mortgage interest rates were 5 percent or 6 percent, nearly everybody got the standard long-term, fixed-rate loan and the homeowning was easy.Since that period, adjustable-rate mortgages have emerged as an alternative to fixed-rate loans and -- in the long period of inflation and high interest rates in the '70s and early '80s -- usually the only choice.But there has been a steady drop in mortgage interest rates over the last six years.

I have received much e-mail lately from buyers who are worried about not being able to find a good mortgage lender. They had a bad experience with their former lender or they're nervous because of all they've been reading about big banks writing down their bad mortgage loans. Choosing the right lender takes time, effort, lots of phone calls and maybe even a few hours on the Internet. This week and next, we'll explore how to figure out which mortgage type is right for you and then how to find a good mortgage lender.