With the average mortgage interest rates well north of 4 percent and predicted to move toward 5 percent by the end of the year, it may surprise you to know that there are still ways to get a rate below 3 percent.
Yes, we said below 3 percent. And yes, on a house.
“It’s definitely possible to get a rate below 3 percent. It’s just going to be a unique product, and not for everyone,” says Nate Kuchera, a senior loan officer with Bank of Manhattan of Newport Beach, California.
But if it is for you, it will save you a lot of money, he says. Here are ways people are still locking in sub-3 percent rates.
Get a 10-Year Mortgage
If you’re looking for the lowest rate you can get on a fixed-rate mortgage, a 10-year term is your best bet, says Kuchera. He says it’s a rare product, but some people do choose it. And right now, he says you can likely find 10-year, fixed-rate mortgages at below 3 percent.
“This is good for people who are on the brink of retiring,” he says. “They’re on the tail end of their careers and want to pay off their mortgage quickly but don’t want to do it in one big lump sum. So they refinance to a 10-year.”
In addition to paying off their home for retirement, he says they also have the opportunity to save a lot of money in interest. That, of course, depends on their original mortgage, he says.
Still, to illustrate how much paying off a mortgage in a shorter time could save you, consider that the lifetime interest on a 30-year, fixed-rate,$300,000 mortgage with a rate of 4.41 percent is $241,460. The lifetime interest on a 10-year, fixed-rate $300,000 mortgage with a rate of 3 percent is $47,619. That’s a $193,841 difference.
There is one thing to keep in mind, however, says Kuchera. With a shorter term mortgage, your monthly payments will be higher.
“Yes, your rate may be better but you know how life is, things come up,” says Kuchera. “So make sure you’re comfortable with the higher payment. If you are, you’ll save a lot of money.”