At a time when mortgage rates are dipping below five percent and adjustable-rate mortgages only account for only about five percent of the current mortgages, the 15-year fixed rate mortgage is gaining ground.

During the fourth quarter of 2009, about 95 percent of the people who refinanced their home choose a fixed-rate mortgage. While the 30-year fixed-rate mortgage is still the most popular option for home buyers and those refinancing, the 15-year fixed-rate mortgages are gaining ground, according to Freddie Mac. People are choosing the 15-year fixed-rate mortgages in an effort to pay less for their loan in the long run even if it means paying a higher mortgage payment each month for a shorter period of time.

Frank Nothaft, the VP and chief economist for Freddid Mac, said the new trend proves an earlier finding that a record number of mortgage borrowers are paying down their loans faster instead of “cashing out” when they refinance.

The low mortgage rates also had something to do with the record number of fixed-rate mortgages among those who refinanced. Many of these home owners were eligible for the lowest interest rate. As of last week, the rate for a 30-year fixed-rate mortgage was at 4.97 percent. For the 15-year fixed-rate, the interest stood at 4.34 percent. That rate is down from the previous week which was about 4.40 percent.

The popularity of the 15-year fixed-rate mortgage shows that people are getting smarter with their money. They are not only choosing the security and predictability of the fixed-rate mortgage, but they are also wanting to pay down their mortgage debt faster with a shorter term mortgage.

Some borrowers are also choosing to reduce their mortgage rates by “buying” points. You can reduce your interest rate by buying a point, which is equivalent to paying one percent of your mortgage loan value.

The recent upswings in the housing industry have sure been a great way to get more first-time home buyers into their first home. The lowered interest rates have also encouraged many current homeowners to refinance their mortgage loans with more favorable terms and save thousands of dollars over the term of the loan.

Other types of mortgages may have more favorable rates, but they are not as secure. The one-year adjustable-rate mortgage, for instance, averaged about 4.33 percent last week. That figure is an increase from the 4.22 percent rate the previous week. The 5/1 ARM was at 4.19 percent last week, dropping from 4.27 percent the week before.

Have you considered refinancing while the mortgage rates are so low? Who knows when this is going to happen again. Take advantage of this phenomenon if you can benefit from it.

Are you a first-time homebuyer hoping to take advantage of today’s mortgage rates but are unsure of the type of mortgage you should get? There are several types of mortgage options out there and you may only qualify for a certain kind. However, if you are eligible to choose your own mortgage, here are the main types there are so you can make a more informed decision.

Fixed-Rate Mortgages
These are probably the most common and secure types of mortgage. With a fixed-rate mortgage, you can expect to pay the same amount on your mortgage payments each month because the interest rate is locked in for the life of your mortgage. There are no surprises like higher monthly payments or fees that you may get with other mortgages. This makes it easy to plan and budget you money since you know how much you need to set aside for your mortgage payment all the time.

Adjustable-Rate Mortgages
These are fairly common types of mortgages these days, but you might otherwise know them as ARMs. With an adjustable rate mortgage, the payment each month fluctuates according to the general interest rate. When mortgage rates are as low as they are today, you would pay a lower mortgage payment each month. Unfortunately, when the general interest rates go back up, however, you would be stuck paying a much larger payment than usual. This makes it hard to plan and budget your money and you could be expected to pay a monthly payment that is more than you can afford. This is why many people have had to leave their homes in recent years because of foreclosures.

Hybrid Mortgages
With hybrid mortgages, you have a fixed rate for a certain number of months or years and then your mortgage switches to an adjustable rate. An example of this would be called a 5/1 ARM. With this hybrid mortgage, you would pay the fixed monthly payment for the first five years and then your rate would be adjusted each year after the initial five years. Your mortgage payment would change each year based on the general interest rate at the time it was modified.

Interest-Only Mortgages
With an interest-only mortgage, you pay payments only on the interest for a set number of years before you begin paying on the principle. Then, after the set time period is over, you will begin making full payments on both the interest and the principle. This is not very common but some new homebuyers choose it because the interest-only payments are fairly low compared to the full mortgage payments and they predict they will be in a better financial situation by the time the full payments begin.

Before making the final decision on a mortgage, consult with some qualified mortgage professionals in your area. It’s a major financial decision that will last for many years to come. Don’t take it lightly, but be realistic about what you can afford before signing any papers.

Overspending on a house was a major contributor to the real estate bubble and its subsequent collapse. To minimize the potential for future problems and the threat of foreclosures, make sure you accurately project your costs and income to determine how much mortgage you can afford.

Overspending and losing a house to foreclosure can impact the wealthy as well.

Below, one of our new contributors Lynne Ashminov shares some thoughts on what to keep in mind when determining how much you can afford. The bottom line: be honest about your finances and don't use any government-like budget tricks to make the budget fits the house.

The average rate on a 30-year fixed mortgage dropped last week from 5.01% to 4.97% according to data from Freddie Mac. The average 30-year fixed mortgage from the BestCashCow rate tables also dipped slightly from 5.017% to 5.015%. Mortgage rates have vaccilated around the 5% range for the last four weeks.

Averages though won't get you a mortgage and I like to check and see what rate is actually available. Since I live in Massachusetts I checked Massachusetts mortgage rates. Below I compared the best rate I could find on a $200,000 30-year fixed rate mortgage with 0 points:

This Week Last Week

Rate: 4.750 4.750%

Points: 0 0

Fees: $1,995 $1,995

AimLoan.com continues to hold the lowest rate at 4.750% and 0 points. That's been the same lowest rate for the past 5 weeks. So, in practical purposes, rates have not moved much in the last month.

The 15-year FRM this week averaged 4.34 percent up from from last week when it averaged 4.40 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.19 versus last week's 4.27 percent. The 1-year Treasury-indexed ARM rose significantl from bit from 4.22% to 4.33%.

Here's what Freddie Mac had to say about the rate situation:

"Interest rates on 30-year fixed-rate mortgages are below 5 percent for a third week this year, which helps a number of homeowners to refinance their existing housing debt" said Frank Nothaft, Freddie Mac vice president and chief economist. "In mid-June of last year, for example, 30-year fixed-mortgage rates topped nearly 5.6 percent. Currently, the monthly payments would be almost $77 per month lower on a $200,000 loan balance.

"In all, more than two out of three mortgage applications were for refinance transactions over the first six weeks of 2010, according to the Mortgage Bankers Association."

The real question though is whether the housing market has stabilized. I wrote about how low interest rates could be a trap for first-time homebuyers in an article entitled Is It A Good Time to Buy a House When Interest Rates Are Low?

If you're going to buy a home, do it realizing that home prices could still fall further. Negotiate hard, get the best possible rate, and be comfortable with the possibility of staying in your house for some time.

Use the BestCashCow rate tables to find the best mortgage rates in your area.

The National Association of Realtors fourth quarter home sales results are out and they tell us what we expected - home sales surged at the end of 2010. The reason: record low interest rates as well as the homebuyer tax credit.

From the press release:

"Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.

Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008. Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier."

None of this should come as a suprise. Mortgage rates hit record lows in December 2009 and the end of the government tax credit last Novembmer spurred many buyers into the market. The tax credit was subsequently renewed through April 2010.

The NAR has always been the cheerleader for the Real Estate industry, as they should be. It's in there interest to talk up the market and spur sales. After all, they don't make money if homes don't sell.

Lawrence Yun , NAR chief economist, said the first-time home buyer tax credit was the dominant factor. “The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”

But what happens when the tax credit expires and mortgage rates move up, assuming they will? Will that result in a broadly balanced housing market? I remember similar cheerleading when the housing market was going up, up, up from 2000-2005. Bubble, what bubble? I don't think the NAR ever said that prices were ridiculously high in some regions of the country. Once again, that's their perogative but be careful in reading their data.

As pointed out here, mortgage defaults paint a picture of a real estate market that is still very sick. In addition, foreclosures increased by over 10% in January 2010 from January 2009.

I hope the NAR stats stick and the housing market is really improving, but I'm going to remain skeptical until more data emerges.

With tax season fast approaching, people are looking for ways to save on their taxes and put more money back in their pockets. Owning your own home offers several tax advantages and benefits and with today’s low mortgage rates, you can put even more money back in your pocket by purchasing a home this year. Here are for tax advantages of owning a home so you can remember them when you are filling out your tax forms for this year.

Mortgage Interest
Did you know you can deduct the interest on your mortgage from your taxes? It’s true! This is one of the biggest tax advantages of owning your own home. The rule states that up to a million dollars of mortgage interest is tax deductible as long as you spend some time in that home. So that means you can even deduct the mortgage interest from your vacation home as long as you spend a couple weeks there each year.

Most homeowners already know about that tax advantage to owning a home. But you might not have known this next one: The IRS allows you to deduct the interest of any debt that uses your house to secure the loan. The debt can be no more than $100,000 however. This applies mainly to home equity loans.

Selling Your Home
When you own your own home and you decide to sell it, you probably do not have to pay taxes on the profits you make from the sale of your home unless you make at least a $250,000 profit for individuals or $500,000 for couples who file jointly. This guideline also covers any land that is adjacent to your home unless you are using it for business.

This guideline also applies only to your main residence. You have to live at the home for two out of the previous five years in order to qualify for this tax advantage. Also, you can only claim this exemption once for every two tax years.

Moving Expenses
When you buy a new home that is 50 miles or more closer to your new job, you can deduct those moving expenses from your taxes for that year. However, in order to qualify for this tax advantage, you must work in the area of your new job for at least 39 weeks during the next year and you must also be employed there full time. If you are self-employed, however, you can deduct your moving expenses when you move to a new home.

Property Taxes
Did you know your property taxes are an income tax deduction? You can write off the property taxes for all the homes you own regardless if you live in them or not.

Tax deductions depend on a number of factors. It is always best to seek the guidance and expertise of a qualified accountant or tax professional when claiming a bunch of tax deductions. Look for one in your local area. The frustration they save you is definitely worth the money!

Paying off your mortgage has several advantages. Unfortunately, many home owners do not want to pay off their mortgages early because they have to pay more each month to make that happen and that gives them less spending money. To be fair, however, some home owners simply cannot put more money towards their mortgage than they already do. However, if you have the opportunity to pay off your mortgage a few years early, here are some benefits that you can reap.

Financial Freedom
How often do you want to buy something during the month but you can’t because you have to make sure you have enough to pay your mortgage payment? When you don’t have a mortgage payment, you can free up a lot of your money. Your mortgage payments are probably the largest bill you have each month. Just imagine how much more financial freedom you would have if you could have that much more money all the time! You could finally pay off some other debts, open that business that you have always wanted to open or buy that motorcycle that you’ve had your eye on for years.

More Money
The longer you pay on your mortgage, the more interest you are paying. Over a 30-year mortgage, you are paying thousands and thousands of dollars just in interest. However, when you pay your mortgage off early, you will pay less in interest. For instance, if you pay off your mortgage in 20 years instead of 30, that’s 10 years of interest that does not accumulate and get added to the overall cost of the home.

Save for Retirement
Mortgage payments often hinder homeowners from contributing as much to their retirement fund as they should. As a result, many homeowners retire but still need to find a job in order to live. When you pay off your mortgage ten years early, you can start putting that money into your retirement account. Just pretend like you are still making your mortgage payments, but send them to your money market or IRA instead.

Sense of Security
Imagine how good it would feel to own your home free and clear. You would never have to worry about getting it taken away if you lose your job or if financial times get tough. Your home belongs to you and you can do whatever you want to with it. If you want to pass it down to your kids after your death or anything like that, it is your decision since you own it.

Owning your own home is part of the American dream. Everybody wants to pay off their mortgage early so they have more liquidity with their money. You may even be able to refinance at today’s mortgage rates and make it happen that way. With some hard work and dedication, you can pay off your mortgage early and enjoy the benefits therein.