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Alternatives to Conventional Home Loans May Actually Be Cheaper

Thinking Outside The Box When It Comes To Financing Your Home Can Save You Money

Defying predictions by financial experts that they’d rise to well over five percent, home mortgage rates are still amazingly low. As of this article date, conventional fixed Mortgage optionsrate mortgages are at just under 4 and a half percent for qualified buyers. A conventional mortgage is typically one that lasts 30 years at a set interest rate.

This is great news for those looking to purchase a home. But did you know that rates are actually even cheaper if you consider other options? What follows are alternatives to conventional mortgages, along with their current interest rate (As of March 12, 2014).

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15 Year Fixed Rate Mortgages/3.48%

This is a great alternative for home buyers looking to save money on their interest rate, while paying off their mortgage in half the time it takes for a conventional home loan. A 15 year fixed rate mortgage allows the borrower to pay down principle more quickly as well, which helps to increase the equity in their property. If there is a downside, it’s that the monthly loan payment will be higher since you’ll be paying it off twice as fast.

FHA 30 Year Fixed Rate Mortgage/4%

Those who qualify under an FHA (Federal Housing Administration) loan may obtain a rate that’s a half percent lower than a conventional mortgage. Qualifications for FHA loans may also be less stringent than a conventional mortgage, although the maximum loan rate for a single family home is $625,000.

Jumbo Fixed Rate Mortgage/4.31%

If you need a home loan up to $729, 750 (In Los Angeles County. Other areas may vary), a jumbo loan is the way to go. At these rates, you most certainly have increased buying power.

5/1 year Adjustable Rate Mortgage/3.25%

By far the best loan rate available, the “Hybrid ARM”, as it’s occasionally referred to, is a loan with a lower fixed rate for 5 years, which will convert to a standard market rate at the end of its term. This helps borrowers to better manage their cash flow in the early years of owning their home, but there is a risk of a considerably higher mortgage rate after five years, even with an interest rate cap. Many borrowers consider this option if they are only going to be remaining in the home for five years or less, or are planning on refinancing to a fixed rate conventional loan prior to the end of its term.

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