Is the 30-year mortgage a thing of the past?

According to a recent story in The Wall Street Journal, the 30-year mortgage is no longer a popular choice, especially among affluent buyers. Why? It’s simple: lower rates mean borrowers can save thousands of dollars in interest. This is particularly popular among those homeowners who are refinancing, because they are able to maintain their monthly payments AND cash in on the benefits of a lower rate on shorter-term jumbo loans. But this new trend is also becoming a popular choice among all home buyers as mortgage rates rise.
This new development stems from this dilemma: choose financing with a costlier 30-year loan or forgo financing altogether and pay cash. The problem with paying cash is that buyers give up the tax benefits of deducting interest payments on up to $1 million. Shorter-term loans offer buyers a middle ground where they can still get the tax benefits while paying less in interest.
Here are the stats from CoreLogic, a real-estate analytics firm: 30-year mortgages accounted for 90.3% of private mortgages during the first 11 months of 2013. That’s the lowest figure in the past seven years, slightly lower than the same period in 2012, and the lowest figure in the past seven years.
The report goes on to say that 15-year mortgages accounted for 9.1% of private mortgages in most of 2013, up from 8.9% during the same period a year earlier.
“It’s a recent phenomenon,” says Mike McPartland, head of investment finance for Citi Private Bank in North America. “If clients notice distinct discounts for taking a shorter product… and if it suits their strategy, they’re going to opt into it.”
With my more than 20 years in the industry — ranking in the top 1% of Sotheby’s agents nationwide prior to my current association with Berkshire Hathaway HomeServices California Properties — I can help you find your dream home in Montecito and steer you in the right direction when it comes to financing. I look forward to discussing your needs with you. Just call me at 805.886.9378 or shoot me an email at Cristal@montecito-estate.com
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