According to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 9, 2021 mortgage applications increased 16.0 % compared to last week.
On a seasonally adjusted basis from last week the Market Composite Index, which is a measure of mortgage loan application volume, increased 16.0 %. On an unadjusted basis, the Index dropped 7 % from last week.
There was an increase of 20% in Refinance Index from the week earlier and was 29 % lower this time last year. Increase of 8% in the seasonally adjusted Purchase Index from one week earlier.
Decrease of 13% in the unadjusted Purchase Index compared to last week and was 29 % lower than the same time a year ago.
Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said overall applications rose last week due to a drop in refinancing rates.
Over the past month, treasury yields have trended down due to the COVID-19 variant affecting the speed of economic growth.
Mortgage rates too feel resulting in 30 years fixed rate reaching 3.09%, which is the lowest since February 2021. Last week saw a 20% increase in refinance applications and a 23 % increase in conventional refinance applications.
Even though the purchase applications increased last week, the average loan sizes reduced to their lowest level since January 2021.
Last week the refinance share of mortgage activity increased from 61.6 % to 64.1 % of total applications. There was also an increase in adjustable-rate mortgage (ARM) share of activity to 3.5 % of total applications.
Last week also saw a drop in the FHA share of total applications from 9.8 % to 9.5 %.
Same time the VA share of total applications decreased from 10.8 % to 10.3 %. There was no change in the USDA share of total applications from 0.5 %.
Last week saw a drop in major rates except for 5/1 ARM.
The average rate for 30-year fixed-rate mortgages with conforming loans decreased from 3.15 % to 3.09 % for 80% LTV loans
The average rate for 30-year fixed-rate mortgages with jumbo loans decreased from 3.20% to 3.16% for 80% LTV loans.
The average interest rate for 30-year fixed-rate mortgages backed by the FHA decreased from 3.17 % to 3.15 %.
The average interest rate for 15-year fixed-rate mortgages dropped from 2.52% to 2.48 %.
The average rate for 5/1 ARMs increased from 2.94% to 3.02 %
Reference Source: MBA
https://www.compareclosing.com/mortgagenews/mba-survey-shows-increase-in-mortgage-applications/
About 15 Year MortgageA 15-year mortgage is one of the popular loan terms second to a 30-year mortgage.
Some borrowers opt for the 15 year mortgage because it saves them a significant amount of money in the long term.The market today is filled with several types of mortgage products.
The 15 year mortgage has its own set of advantages and disadvantages in comparison to the 30-year.While both the products share similarities, the interest rate can be impacted by the borrower’s credit history and credit score.Timely payments, length of credit history, and how many open credit accounts are the factors that determine the credit score, which is a numerical representation of how likely a borrower will pay back money owed.Both a 15 year and a 30-year loan require adequate monthly income to cover the potential mortgage payment and other debts.Pros of a 15 Year MortgageBoth the 15-year and 30-year mortgages have fixed rates and fixed payments over their terms.Let us look at the advantages of a 15-year mortgage against a 30-year.The total interest is lessSince the total interest payments of a 15-year mortgage are less than a 30-year mortgage it would cost less in the long run.The cost of a mortgage is calculated on an annual interest rate and as you’re borrowing the money for half the term, the total interest paid will also be lower than what you’d pay over 30 years.Lower Interest RateShort-term loans are considered less risky and cheaper by banks to fund compared to long-term loans, hence a 15-year mortgage comes with a lower interest rate.Compared to a 30-year mortgage these rates can be anywhere between a quarter-point to a whole point lesser.Government-sponsored companiesIf the mortgage is purchased by Fannie Mae, one of the government-sponsored companies, you will end up paying less in fees for a 15-year loan.Fannie Mae and the other government-backed enterprises charge loan-level price adjustments for 30-year-mortgages.These fees are applicable to borrowers who have lower credit scores and make smaller down payments.A lower mortgage insurance premium is charged to 15-year borrowers by the Federal Housing Administration (FHA).Lenders require PMI when you put a down payment that is smaller than 20% of the home’s value.PMI protects the lender in case you default on the payments.
It is charged as a monthly fee added to the mortgage payment, and it ceases once you pay off 20% of your mortgage.Compulsory SavingsFinancial planners consider a 15-year mortgage a type of forced savings as the monthly payment is higher for a 15-year mortgage.So instead of taking the monthly savings from doing a 30-year and investing the funds in a money market account or in the stock market, you’d be investing it in your house, which over the long run is likely to appreciate.Cons of a 15 Year MortgageEven after the interest saved with a 15 year mortgage, borrowers should consider a few disadvantages before plunging into the term.Higher Monthly PaymentsAs the 15-year mortgage loan needs to be paid off in half the time it has a higher monthly payment than a 30-year.For instance, a 15-year loan of $250,000 at 4% interest will have a monthly payment of $1,849 against $1,194 for the 30-year.So the 15-year monthly payment is about 55% higher than the 30-year for the same amount at the same rate.Less AffordabilityBecause of its higher payment, the buyer might be limited to a more modest house than they would be able to buy with a 30-year loan.With the same example mentioned above, if the mortgage lender will only approve a maximum of $1,500 per month.The borrower would need to buy a house that is cheaper a $200,000 mortgage at 4%, for 15-years, turns out for a payment of $1,479.Whereas a 30-year loan would result in a $1,194 monthly payment that is under the $1,500 limit approved by the lender, the 30-year loan might allow the borrower to buy a larger home or take on a bigger mortgage.So a 30-year mortgage for a $300,000 home would cost $1,432 per month, which too is under the $1,500 maximum and allows you to take on a larger loan by getting a bigger home or a better location.Less Money Going to SavingsThe higher payment requires higher cash flow and one year’s worth of income in liquid savings.The higher monthly payment means a borrower would have to let go of the opportunity to build savings or save for goals like college tuition for a child or his retirement.ConclusionLike a 30-year mortgage a 15-year mortgage, too is a home loan having the same interest rate and monthly payment for the life of the mortgage.Depending on your financial situation and goals you can decide if you want to opt for a fixed 15-year or 30-year mortgage.A homebuyer can save significant money over the length of the loan with a 15-year mortgage because the interest paid is less than in a 30-year mortgage.Refinancing into a 15-year mortgage when you are halfway through your 30-year mortgage, may lower your interest payments while still paying off the loan in the expected amount of time.Because in a 15-year loan the payments are significantly higher, if buyers cannot keep up with the payments due to loss of job or change in income they risk defaulting on the loan.https://www.compareclosing.com/blog/15-year-mortgage-pros-and-cons/
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