Paying off your mortgage is one of the greatest feelings in the world. However, there are some people who put off paying their mortgage off completely for a variety of reasons. Some cite tax benefits of their mortgage while others are afraid to take that much money out of their savings because it is there in case of an emergency. These are good reasons, but paying off your mortgage has many more benefits than keeping it. Here are a few reasons why you should pay off your mortgage if you are in a financial position to do so.

1. More Cash Flow
When you pay off your mortgage, you have more cash in your pocket each month. Mortgage payments are in the hundreds of dollars and some of them are even in the thousands of dollars. If you were able to pay off your mortgage, just imagine putting all those dollars each month back into your bank account or pocket.

2. Overall Cost
Unless you are paying zero percent mortgage rates on your home (which is unheard of), your mortgage is costing you money each month. Of course, you can use your payments as a tax deduction and lower your tax bill each year. But the money you will save in interest by paying off your mortgage as early as possible probably will not equal the amount of savings you get on your annual tax return.

3. Security
Just imagine how secure you would feel knowing that you don’t have to make a house payment each month. When you are making payments, there are always thoughts in the back of your head like “What if I lose my job?” or “What would happen to my family if I died or became disabled?” When you have a paid-off mortgage, that is one less financial worry that you and your family have to worry about.

4. Building Equity
Equity is a great thing. It is the accumulation of payments you have made on your home which is available to you in case of an emergency. When you have your mortgage paid off, you have more equity available to you in case some medical need arises or for whatever reason. Terms are fairly cheap for home equity loans so this gives you one more option if you ever need more credit in the future.


These are just a few of the reasons you should pay off your mortgage if you have the opportunity. You may save some money in the short run by keeping your mortgage, but you could end up paying for it by the time the mortgage terms are over.

Average 30-year mortgage rates dropped again 11 basis points from 4.60% to 4.49% according to BestCashCow/Informa data. Mortgage rates peaked in 2010 at 5.20% in early April, meaning that anyone who got a mortgage at that time can refinance soon, if they haven't already. Fifteen year mortgage rates broke below 4% with the average at 3.94%. That's a 50 year low.

This is a boon to homebuyers as well as those looking to refinance their homes. The 10 year Treausury, which serves as a benchmark for 30 year mortgage rates, fell from 2.83% last week to 2.62% this week. Many economists are predicting that rates could fall to 2% or under. If that happens, rates on 30 year and 15 year mortgages would continue to drop. Fifteen-year mortgages could fall into the low 3% range. There's certainly no indication that rates will rise anytime soon.

Does that mean you shouldn't buy or refinance now? No. Rates are at record lows and if you have the opportunity to take advantage of them, do it.

What Does This Mean for Homebuyers?

I've been following actual rates, not just averages for a 30-year fixed rate loan in Massachusetts with 0 points ($200,000 loan) for the past four months. Two months ago the rate shot up to 5.125%. The best rate is now 4.250% with 0 points and $884 in fees.

I've heard anecdotally that lenders are tightening their lending standards up even further. If anyone has evidence of this, let us know. Leave a post below with your experience. Rates may be at record lows but that doesn't help if it's become extremely difficult for millions of Americans to get a purchase or refinance loan.

View mortgage rates by state and zip code.

One of the biggest obstacles for first-time homebuyers is coming up with a down payment when buying a home. This keeps many people from ever owning a home or it may set back their plans to purchase a home by several months or even years. But what if there was a zero-down mortgage plan in the works? Would that make a difference in the number of people who would be able to afford to purchase their first home?

According to some sources, such a plan is getting ready to take effect. The Senate recently approved a bill that would restore the USDA’s Single Family Housing Guaranteed Loan Program. Actually, the Senate approved to restore the funding for the program, which is known as Section 502. It has been around for quite some time but the funding just has not always been available. When funding is not available, people cannot take advantage of the program. The program is designed to help families with low incomes afford a home by offering low-cost, zero-down payment options for mortgages.

Under the new guidelines, mortgage borrowers would pay an upfront fee of about 3.5 percent of the amount that they borrow. This would be a one-time fee which would go into the program to help keep it self-sustaining and available throughout the year for future borrowers. This fee, however, can be rolled into the mortgage payments so it would still be a zero-down payment situation to help buyers who have no money upfront to buy a home.

Despite its design to help low income families, the USDA program requires buyers to have good credit in order to qualify. Borrowers must also meet certain income limits, including a maximum income of no more than 115 percent of the local median income based on the size of the borrower’s household. For borrowers who have an income that is 80 percent or lower than that of the median income can qualify for this program as well as other programs to help subsidize their loan. In addition, buyers under this program may not be required to pay for private mortgage insurance, or PMI, but the USDA may charge the buyer a yearly fee that is equal to 0.5 percent of the amount of the home loan, which is about the same as paying for PMI.

As for the program itself, it will only fund home purchases in rural areas. This includes homes in townships of less than 10,000 people or small cities with less than 25,000 people. The homes must also be modestly-sized and have a modest cost as well. The average home purchased under this program is around $112,000 so you won’t be buying mansions with the USDA program.

With people jumping to take advantage of the historically low mortgage rates, programs like this are ideal for consumers who simply cannot save up for a down payment right now. Hopefully it will help thousands if not millions of Americans realize the dream of owning a home who would have otherwise given up on the idea.

Many first-time homebuyers are itching to take advantage of the record low mortgage rates these days. But without the proper credit or qualifications, many of these hopeful homeowners are being turned down for mortgage loans and for the low mortgage rates. Fortunately, there are ways to help you get more favorable loan terms if this sounds like your situation. A cosigner for your mortgage is one ideal way to get a mortgage lender to make you a better offer when you apply for a mortgage.

Young people often need to turn to a cosigner to help them qualify for better terms on their mortgage loan. If they have had trouble getting credit or if they have messed up their credit in the past and recently tried to fix their past mistakes, a cosigner could be the extra edge they need to obtain a mortgage. Unemployment, divorce and other credit problems occur and it is tough to bounce back without the help of a cosigner. But even retirees often need cosigners if they have a limited income, so needing extra help is not exclusive to young home buyers.

Unfortunately, a cosigner will not help much if the mortgage borrower would not qualify for a loan by themselves. If they are on the verge of qualifying but it could go either way, a cosigner may tilt the odds in the borrower’s favor. However, borrowers who have really bad credit scores (in the 500s or lower) will not be considered for a mortgage loan even if they have a cosigner. Mortgage lenders typically base their decision on the lower of the two scores so even if your cosigner has impeccable credit, your score will be the one that determines if you will qualify or not. The only time a cosigner will actually be considered is if the borrower has no credit history. Then the lender may make their decision solely on the credit score of the cosigner, but this may not always happen.

If you are asked to be a cosigner on a mortgage, do not take this decision lightly. If the mortgage borrower defaults on their loan, you will be the one that becomes responsible for it. You may want to help your son, daughter, grandson, granddaughter, nephew, niece or other family member get a great rate on their home loan, but at what expense will it be to you? If they have already ruined their own credit, there is a good chance that they will ruin your credit as well. If you do decide to be a cosigner, make sure you stay updated on the status of the loan payments. You will not get late notices or other alerts so it will be up to you to stay on top of this. Also, be aware that the mortgage loan will show up on your credit, meaning you have less available credit to you for as long as you are on the mortgage note.

Once the borrower begins to build their credit, they can refinance the loan in their own name and your name can be taken off of the loan. These are all important considerations for both the primary borrower and the cosigner so be aware of them and communicate with each other before and after the loan goes through.

If you are searching for your first home, chances are you may not have a great deal of knowledge about the mortgage market and some of the terms used in the industry. Two of the more common terms you will come across are “fixed-rate mortgages” and “variable-rate mortgages.” Although they sound the same, these two ideas are very different.

Until the recent housing crisis, variable rate mortgages seemed like the way to go. When you have a variable rate mortgage, each month your mortgage payments are based on the current interest rates. When rates were low, homeowners were enjoying the lower payments on their mortgage. However, those rates increased and many homeowners found themselves in a dilemma. They were unable to pay their mortgages because of the variable rate. They did not think that rates would go that high. As a result, thousands of homeowners have been displaced due to foreclosure.

Variable rate mortgages are not recommended for first-time homebuyers who are inexperienced in the housing market. Variable rates are better left to those who are investors who can “time” the market and make a profit from the rates adjusting every now and then.

Fixed rate mortgages, on the other hand, are ideal for most homebuyers. Fixed rate mortgages may cost a little more each month, but at least the homeowner knows exactly how much their mortgage payment is going to be from month to month. With a fixed rate mortgage, your monthly payments will remain the same throughout the life of the loan unless you decide to refinance.

The best time to get a fixed rate mortgage is when the rates are low. Right now, mortgage rates are at the lowest point they have been at in decades so now would be a great time to jump into the housing market if you have been holding off for whatever reason. One of the only disadvantages to getting a fixed rate mortgage is that if the base rates go down, you cannot benefit from the lower rates. You can, however, consider refinancing at the lower rates. If you have been in your home for a few years and you are in a better credit situation than you were when you bought the home, you could benefit by refinancing if the rates drop.

Fixed rate mortgages are without a doubt the ideal way to go if you are looking for security and a consistent payment each month. I think we have all learned about the dangers of variable rate mortgages with the last couple years of economic problems in which they have played a major role.

The Fed today released its FOMC statement, in which it painted a picture of an economy that is not growing as quickly as anticipated.

"Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated."

According to a WSJ article, more than 75% of economists now believe that deflation is a bigger threat to the economy than inflation. What a change! Just six months ago these same economists were worried about a massive inflationary spiral kicked off by high government borrowing. If you don't like deflation, wait another six months and we'll be back to inflation.

But in the meantime, if you are looking to buy a home or refinance, rates may get even better. The Fed said:

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.

Ten year Treasury yields fell from 2.83% yesterday to 2.76% today. Last month, the 10 year yielded 3.06%. The 10-year is the benchmark rate for 30 year mortgage rates, meaning that if it falls, mortgage rates will also fall. As I reported yesterday, 30 year rates are already at a 50 year low of 4.60%, and many are predicting they will go lower. It's conceivable that 15 year mortgage rates could fall below 3.5% in the next six months.

While savers are suffering, mortgage borrowers have never seen rates so low.

Check mortgage rates in your area.

Average 30-year mortgage rates dropped to 4.60% according to BestCashCow/Informa data. That's down from 4.66% and a 2010 high of 5.20% in early April. Fifteen year mortgages rates are close to breaking into the 3% range and now stands at 4% even. Data from the National Bureau of Economic Research indicates that the 30-year fixed hasn't been this low since the 1950s.

This is a boon to homebuyers as well as those looking to refinance their homes. Many economists are not predicting that 30 year US Treasury bonds will drop from a current yield of 2.83% to 2% or under. If that happens, rates on 30 year and 15 year mortgages would also drop. Fifteen-year mortgages could fall into the low 3% range.

The 10-year is the benchmark rate for 30-year mortgages so if the yield continues to fall, mortgage rates will fall with it.

Does that mean you shouldn't buy or refinance now? No. Rates are at record lows and if you have the opportunity to take advantage of them, do it.

What Does This Mean for Homebuyers?

I've been following actual rates, not just averages for a 30-year fixed rate loan in Massachusetts with 0 points ($200,000 loan) for the past four months. Two months ago the rate shot up to 5.125%. The best rate is now 4.460% with 0 points and $1,995 in fees. That's down from 4.50% just a few weeks ago.

View mortgage rates by state and zip code.