Lowest Mortgage Interest Rates in 37 Years of Freddie Mac History

Mortgage interest rates plummeted last week, falling to the lowest level in the previous 37 years, setting the record for the lowest 30-year fixed rate interest rate since Freddie Mac began to survey the data in 1971. Rates averaged 5.14% for the week ending December 24, 2008, down from the previous week's low of 5.19%, but more than a full percentage point lower than the previous year's 6.17% average, according to Frank Nothaft, Freddie Mac's chief economist.

But does that mean people should phone their local mortgage broker just yet? In order to get these rates, it would require about an 0.8 point payment average. The 15-year fixed-rate mortgage would follow close behind, requiring an 0.7 point payment average and ARMs would an average 0.6 point payment requirement. Considering that one point is equivalent to one percent of the mortgage amount, and housing prices in some areas remain inflated, this end up being quite a bit for hopeful home buyers. But others are currently searching for mortgage refinancing assistance, if even to find out how they can benefit from the current low interest rates, perhaps find their way out from under their high ARMs, and get into a more reliable 30-year fixed-rate mortgage instead.

But as mortgage rates tumble, the number of mortgage applications is climbing high. The Mortgage Bankers Association (MBA) reports that mortgage applications have skyrocketed 48% upwards to 1,245.4, which is the highest since 2003. Banks and mortgage firms have begun to hire back some of the same mortgage and loan employees that they so recently fired and laid off. Potential borrowers have been eager to refinance since government interventions that helped push the interest rates down to record lows.

With unemployment on the rise, and a volatile stock market, the already troubled housing market continues to suffer, and housing prices continue to drop. As predicted, this is proving to be a tremendous strain on homeowners who purchased homes at the inflated price, leaving them to either refinance for a lower interest rate and pay off the bloated mortgage, or hope for the possibility of selling out at a huge loss, perhaps owing a large chunk of mortgage on a house they no longer own.

But those who have a currently high interest rate and clean credit report, refinancing at these low rates could be life saving. Many homeowners are stuck in high-interest ARMS, and a lower interest rate - even on a 30-year fixed-rate mortgage, could provide just enough monthly financial relief to slide through difficult times. And just maybe - the drop in interest rates could save the homes of those struggling to make payments that just don't fit in the budget anymore.

Your Tax Refund Check Can Help Shave Your Mortgage in Half

Many people who get refund checks are wondering how they will be spending their extra money this year. But if you play your cards right, you could be shaving years off of your mortgage - and save thousands in the long run.

Whether you are locked into an ARM or a fixed rate mortgage, you can still greatly benefit from this debt-diminishing payment method. They key is to come up with an extra mortgage payment each year, which in turn will shave the life of the mortgage by up to half. Just think, by making one extra payment per year, you can turn a 30-year mortgage into a 15 year mortgage, saving you tens of thousands of dollars in the end.

There are several ways to pull this off, even if you are on a tight budget. Lets say that your mortgage payments are $1200 per month: You can either split that one-time-per-year payment into monthly installments that you regulate yourself, or you can pay a lump sum each year on the principle only using holiday bonuses from work, or using your annual tax refund check. Either way, your extra payment will go towards just the principle, rather than the typical payments, which are nearly all interest payments.

For some interesting figures that may help you decide how much you can afford, how much time you'll save, estimate your expected pay-off date, and the total amount you'll pay over the life of your loan, check out this mortgage calculator!

Can the 40-Year Mortgage Save You Money?

I hear the question asked all the time, "How much money can I save with a 40-year fixed rate loan?" The answer is simple, every time: None. In fact, over the life of a loan you will end up spending much more than you may have thought. While it may seem reasonable could save $100.00 each month on their mortgage payment, a "snail's pace" doesn't even seem to begin to describe the rate at which a borrower would build equity on their new home. The truth of the matter is, that the higher interest rates and over-priced housing has caused an alarm bell to go off with lenders, and new and inventive ways to keep sales up have become necessary to keep the industry afloat. Does it help borrowers? It helps keep the monthly payments slightly more affordable, but when it comes time to resell, financial problems could surface. A simple shift in the economy could send some 40-year borrowers into foreclosure instead of a profitable sale; as interest rates continue to climb, sales prices in some areas deflate, the 40-year loan has great potential to turn upside down - and fast.

Freddie Mac has introduced a line of 40-year mortgage products with a catchy sales pitch: "40-Year Home Possible Mortgage: More House with Less Income", and boasts that it has "standard low down-payments, flexible credit underwriting, and conforming conventional rates to give cash and credit strapped borrowers even more buying power." New homeowners are in the most danger from this type of loan, as most of them believe that in the long run, this type of loan will actually help them. Remember, 2007 is when many of the trillions of dollars of creative ARMs will do their thing - adjust. Do we really need to put more homebuyers at risk of foreclosure by "loosening" the credit and income standards even more?