These currently charge just less than 8 percent. That is slightly below the 30-year rate. The interest rate saving is too small to justify a mandatory monthly payment this high. Borrowers who want to pay off their loans sooner than 30 years can simply make extra principal payments voluntarily. That reduces the interest costs over the life of the loan but allows the borrower to opt out of the higher payments if money is tight.
Borrowers also have a variety of hybrid loans to choose from, and some can be attractive.
These offer starting rates that are fixed for three, five, seven or 10 years. The key when you are choosing among types of loans is to figure how long you are likely to have the mortgage. The average mortgage is held only 10 years, because the homeowner either sells or refinances. Gumbinger suggests that a borrower shop extensively before picking a loan. There usually are some lenders, especially small firms hungry for business, that offer substantially lower rates than the averages quoted above.