Mortgage interest rates are at historic lows. How many times have you heard that from real estate industry people, friends and family, and the guy who does your dry cleaning? While the rates truly are at historic lows many people are not taking advantage of the opportunity to either buy their new home or refinance their high interest rate to a (sometimes considerably) lower interest rate.

First I would like to take a look at mortgage interest rates for purchases. The chart to the right are the latest reported interest rates with a comparison to the previous week’s rates. As you can see there is some difference between the type of mortgage product selected. Another thing the chart does not show is that the interest rate will also vary based on the type of loan, conventional, FHA, VA, USDA and whether there are hits (increases) to the interest rate based on risk (often determined by the percentage of downpayment) Be sure to discuss what product types you qualify for and what loan type has what advantages and disadvantages. Except for conventional loans, the others are for primary residences only. If you have been qualified to buy a home and are prepared for the responsibility of home ownership, these interest rates coupled with lots of inventory on the market (in most markets) make this the ideal time to buy.

Next I want to examine refinancing from a higher interest rate to a current low interest rate. You see a chart to the right similar to the chart above. This chart shows the current interest rates for a refinance. As with the above, there is a definite difference based on the mortgage product selected and the type of loan. You should also know that you can refinance from one type of loan to another type of loan, for example a conventional loan to a FHA loan. Many people can see substantial monthly savings by reducing their monthly mortgage payment with a lowered interest rate. What represents an interest rate that is reduced enough to see substantial savings? Generally, using a 30 year fixed rate mortgage term, a 1% interest rate reduction on a $100,000 loan will yield approximately $70 a month in savings while the same 1% interest rate reduction on a $250,000 loan will yield approximately $160 a month in savings. This difference is important and a good reason that your savings should definitely be addressed with your mortgage professional.

When you hear that rates are at historic lows, you should definitely ask yourself, what that means for you.