United Wholesale Mortgage – a company that earlier this year announced 30-year fixed mortgage rates as low as 2.5% and VA loans for veterans and the military at just 2.25% – just introduced a 15 year loan with rates below 2%.
Far below average prices
Mortgage rates fell to record highs in 2020 as the coronavirus crisis rocked financial markets and prompted the Federal Reserve to cut interest rates to the bone.
According to the Mortgage News Daily, 30-year fixed rate mortgages this weekend are averaging 2.87%, tying its survey’s all-time low.
But UWM’s new 15-year fixed rate mortgages have rates as low as 1,875%. That’s unprecedented – and well below the national average for these loans, currently 2.51% according to mortgage company Freddie Mac.
A 15 year mortgage “is a great way to refinance. A lot of people see it as a way to cut years off their mortgage, ”says Mat Ishbia, President and CEO of United Wholesale Mortgage.
A homeowner who has taken out a 30-year mortgage for several years can renew their loan for 15 years and avoid stretching interest charges for decades further.
Mortgage rates with shorter terms tend to have lower rates but much more rigid monthly payments. The 15-year UWM loan rate is so low that some refinancers may not find a major difference in their mortgage payments when they leave a 30-year loan.
The calculation on a low cost mortgage
Here’s how it works: Let’s say you took out a 30-year, $ 250,000 mortgage five years ago at 5%. (Obviously, you haven’t done enough of the comparisons, as the rates were on average around 4% in the summer of 2015.)
You paid 1 342 $ in principal and interest each month and you have almost $ 230,000 left on your loan.
Refinancing this balance into a 15-year mortgage at 1.875% would give you a monthly payment of 1 466 $, just $ 124 more than what you are paying now. And your interest savings would be huge.
The 15-year loan carries a lifetime interest charge of approximately 34 000 $. If you refinanced a new 30-year, $ 230,000 loan at, say, 3% and stayed with the mortgage until the end of its term, you would pay the full interest charge of 119 000 $. The difference is huge.
Again, the new 30-year fixed-rate mortgage would have a monthly payment of only 969 $, significantly less than the 15-year option.
Are all the numbers starting to make your head spin? Think of it this way: the significantly lower interest charges make the 15-year loan a good choice for refinancing if you plan to stay in the home for the long term. A 30-year refi loan, with its lower monthly payment, is best if you can move in a few years.
How to get a cheap 15-year mortgage
The new 15-year low-rate mortgages are part of UWM’s Conquest program, as are the lender’s 30-year ultra-cheap conventional and VA loans.
“Over 90% of our loans are in the range of 1% or 2% and we have had a massive response for both purchases and refinances since we launched the Conquest program in May,” says Ishbia.
As the name suggests, United Wholesale Mortgage is a wholesaler, so you cannot get a mortgage directly from UWM. Loans are only offered through independent mortgage brokers, both to homebuyers and refinancers.
The program states that a borrower cannot have taken out a UWM loan in the past 18 months.
As always, you will find the best mortgage rate based on your credit score and your situation while researching your loan.
Be sure to take a similar approach when purchasing or renewing your home insurance. Get quotes from multiple insurers and review them side by side to find the right coverage at the lowest price.
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