A NYTimes graph displaying traditional forward mortgage rates for the NY region
Although reverse mortgages require no mortgage payments, many homeowners still have traditional forward mortgages. It is in the context of this traditional market that the following information applies:
The New York Times reported this weekend that 15 year fixed rate mortgages have surged in popularity recently. The number of 15 year fixed rate mortgages increased 56.6% from January to February. While these mortgages may seem attractive, sometimes saving borrowers tens of thousands of dollars in interest payments, lenders counsel that with higher payments, those with 15 year mortgages are more likely to have trouble making payments should they lose their job or encounter another financial emergency. One lender in the article proposed getting a 30 year mortgage and making the payments to pay it off in 15 years, but that way if there were an emergency, the borrower would have a cushion.
I do think that unorthodox thinking appears to be one of the best ways to get through the recession and through nearly any crisis. It is unsurprising that borrowers are looking for low rates (rates on the 15 year fixed rate mortgage are the lowest they’ve been since June 2003). In addition, being able to pay off a mortgage in 15 years is becoming a more and more tempting opportunity for borrowers who don’t want to have to make mortgage payments in retirement–another factor that has made reverse mortgages tempting.