15-Year or 30-Year Mortgage? You Actually Have Other Options

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refinancing optionsBy Jeff Brown

When applying for a mortgage, should you pick a 15-year or 30-year loan? In a perfect world, you might pick something else -- 12 years or 23 years, for instance -- to get just the right combination of affordable payment and minimal interest expenses.

Now Quicken Loans has launched an unusual mortgage product called YOURgage that allows borrowers to do just that. While it's promoted for people who are refinancing, it could be just as useful for those who are borrowing for a home purchase.

A shorter term can produce two types of savings.

With a 15-year loan at, say, 3.5 percent, the borrower would pay $715 a month for every $100,000 borrowed, and interest would total about $28,700 over the loan's life, a huge saving from the $61,700 in interest on a 30-year loan at the same rate, with a payment of $450.

With the shorter loan term, borrowers save in two ways: the total interest payments being much lower, as well as a lower rate being offered to the 15-year versus 30-year loan. Lenders offer this break because they face fewer risks when the term is shorter. Currently, the 15-year loan averages about 3.1 percent, while the the 30-year is at 3.7 percent, according to the BankingMyWay.com data.

The Quicken YOURgage product allows the borrower to choose any loan term from 8 to 30 years. Reducing the term substantially will get you a lower rate as well as the savings from fewer payments, but two terms that are relatively close will carry the same rate.

The product is aimed at people who are refinancing and don't want to go from, for example, a loan with 23 years left to a new loan for 30, as the seven extra years of interest payments could well wipe out the savings from refinancing to a lower rate.

Read the rest of this story at TheStreet.com.

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15-Year or 30-Year Mortgage? You Actually Have Other Options

Mortgages underwater: 24.6%
Total property value: $305.30 billion (13th highest)
Mortgage debt outstanding: $233.19 billion (13th highest)
Mortgages 90+ days delinquent: 6.6% (14th highest)

Of the state’s 2.16 million mortgages, about 529,800, or nearly a quarter of homes with mortgages, were underwater as of the first quarter of this year. Meanwhile, an additional 125,901 homes, or 5.8 percent of the homes in the states, were near negative equity. In April, 6.6 percent of those with mortgages were 90 days or more overdue on their payments, and 3.4 percent were in foreclosure -- the 10th-highest proportion in the country. While the state has the 10th-highest percentage of mortgages with negative equity, it has the seventh-highest total loan to value ratio of 76.4 percent.

Pictured: Toledo

Mortgages underwater: 24.8%
Total property value: $416.56 billion (ninth highest)
Mortgage debt outstanding: $293.50 billion (ninth highest)
Mortgages 90+ days delinquent: 7.9% (sixth highest)

Between the end of 2006 and the end of 2011, home prices in Maryland fell by 28.9 percent, the 10th-largest decline in the country. Nearly 30 percent of Maryland’s homes with mortgages either had negative equity or were near negative equity as of the first quarter of this year. Fortunately, Maryland’s economy is better than most. The state’s unemployment rate in May was 6.8 percent, and Maryland has the highest median income in the country, which should help mitigate some of the pressure on homeowners. However, while foreclosure rates in April were the 17th highest at 3 percent, the state has the sixth-highest percentage of mortgages that are 90 days or more delinquent on their payments.

Pictured: Baltimore

Mortgages underwater: 26.3%
Total property value: $46.88 billion (13th lowest)
Mortgage debt outstanding: $34.70 billion (15th lowest)
Mortgages 90+ days delinquent: 4.8% (17th lowest)

The total property value of the state of Idaho is an estimated $46.9 billion. Total outstanding debt is estimated at $34.7 billion. Between the end of 2008 and the end of last year, home prices fell by 22 percent, the third-highest decline in the country and worse than states like Florida and Arizona. Fiserv projects that the state’s housing market is making a recovery. Home prices are expected to rise by 4.1 percent in 2012 — the largest increase among all states. Between the end of this year and the end of 2013, they are expected to increase an additional 12 percent — far more than any other state.

Mortgages underwater: 28%
Total property value: $480.02 billion (seventh highest)
Mortgage debt outstanding: $368.11 billion (sixth highest)
Mortgages 90+ days delinquent: 8.8% (fourth highest)

There were 624,577 negative equity mortgages in Illinois, higher than all states except for California and Florida. Together with near negative equity mortgages, that number rises to 734,459. Homeowners in Illinois have more than $368 billion in mortgage debt outstanding, or more than three times the $112 billion those homeowners have in home equity. Some of the homeowners are in significant trouble. About 5.3 percent of all homes in the state are in foreclosure -- more than all states except for Florida and New Jersey.

Pictured: Chicago

Mortgages underwater: 30.5%
Total property value: $2,690 billion (the highest)
Mortgage debt outstanding: $1,911 billion (the highest)
Mortgages 90+ days delinquent: 6.2% (18th highest)

The California housing market is so large that it has a strong effect on national averages. About 22 percent of both the total property value and outstanding mortgage debt in the U.S. is in California. Between the fourth quarter of 2006 and the fourth quarter of last year, home prices fell in California by an estimated 46.7 percent — the fourth-largest decline in the country after only Nevada, Arizona and Florida. The state’s mortgage owners have taken a severe hit as a result. Not helping matters much is the state’s high unemployment rate. In May it was still in the double digits at 10.8 percent, the third highest in the country.

Mortgages underwater: 35.6%
Total property value: $193.15 billion (18th highest)
Mortgage debt outstanding: $161.24 billion (18th highest)
Mortgages 90+ days delinquent: 5.5% (24th lowest)

Despite more than 1 in 3 homes with negative equity, there are some positive signs in Michigan. The state was the only one on the list with rising home prices in 2011, with prices increasing a modest 1.7 percent. Meanwhile, Michigan’s unemployment rate of 8.5 percent ranked 12th in the U.S. in May. This is quite the improvement from the long period — until June 2010 — that Michigan held the dubious title of having the highest unemployment rate in the nation, topping out at more than 15 percent at the height of the recession.

Pictured: Detroit

Mortgages underwater: 37.2%
Total property value: $293.01 billion (15th highest)
Mortgage debt outstanding: $246.52 billion (11th highest)
Mortgages 90+ days delinquent: 7.2% (eighth highest)

In 2011 alone, home prices fell by approximately 12.7 percent in Georgia, more than any other state in the country. Measured from the end of 2006, home prices have plunged nearly 35 percent, and are projected to fall an additional 4.2 percent in 2012. More than 7 percent of homeowners with a mortgage are 90 days or more delinquent on their payments as of April, the eighth-highest rate in the country. In all, total outstanding mortgage debt comes to $246.5 billion, the equivalent of 84.1 percent of the total property value in the state. This is the fourth highest loan-to-value ratio in the country.

Pictured: King and Prince beach

Mortgages underwater: 43.4%
Total property value: $249.17 billion (17th highest)
Mortgage debt outstanding: $221.71 billion (15th highest)
Mortgages 90+ days delinquent: 5.8% (20th highest)

While states such as Arizona helped fuel economic growth in the mid-2000s with rising home values and new construction, the housing market began to hollow by 2007 and 2008. Case-Schiller predicts that home prices in Arizona will fall 9 percent in 2012, more than any other state. But other signs are pointing to an improving housing market, albeit modestly. When 24/7 Wall St. looked at underwater mortgages in March, 48.3 percent of Arizona’s mortgages were underwater, the second-highest rate in the country and nearly 5 percent higher than a quarter later. Meanwhile, total property value has risen a modest $6 billion between the fourth quarter 2011 and the first quarter of 2012, while outstanding debt has fallen by about $4.5 billion.

Pictured: The Grand Canyon

Mortgages underwater: 45.1%
Total property value: $777.34 billion (3rd highest)
Mortgage debt outstanding: $684.97 billion (second highest)
Mortgages 90+ days delinquent: 16.8% (the highest)

Home prices in Florida were nearly cut in half between 2006 and 2011. By the end of the first quarter, there were more than 1.9 million negative equity mortgages in the state with another 168,000 near delinquency. Homeowners in the state owe about $685 billion in mortgage payments, more than any other state except for California. Florida’s unemployment rate of 8.6 percent is above the national average of 8.2 percent, but it still could help it get out of the mortgage mess quicker than states such as California and Nevada, which have much higher unemployment rates.

Pictured: Orlando

Mortgages underwater: 61.2%
Total property value: $93.39 billion (23rd lowest)
Mortgage debt outstanding: $106.45 billion (21st highest)
Mortgages 90+ days delinquent: 12.1% (second highest)

No state has been hit harder by the housing downturn than Nevada. Between the end of 2006 and the end of 2011, home values have tanked nearly 60 percent, higher than any other state by 7.2 percentage points. In 2011 alone, home prices fell another 9.4 percent. This has left many Nevadans owing significantly more on their homes than they are worth. The average loan-to-value ratio of a Nevada home is 114 percent, 25 percentage points higher than Arizona’s 89 percent (the second highest). In May, 24/7 Wall St. reported that 71 percent of mortgages in the state’s largest city, Las Vegas, were underwater, with values declining 63.2 percent from their peak. The state’s unemployment rate is 11.6 percent, the highest of any state in the U.S., making it that much harder for many Nevadans and damping hopes of a quick recovery.

Pictured: Las Vegas

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