Take advantage of low mortgage rates

  @Money August 27, 2012: 11:05 AM ET

Mortgage rates hit or match new lows.

(MONEY Magazine)

Mortgage rates have become a broken record -- in more ways than one.

In 12 of the 13 weeks from mid-April through mid-July, long-term home loan rates matched or hit new lows, as 30-year fixed loans fell to 3.53%, their lowest level in at least 40 years. (Since the end of July, they've edged up to 3.66%.)

Mortgages closely track Treasury yields, which have been flattened by investors seeking safety amid lackluster U.S. growth forecasts and European financial woes.

"No one expects rates to leave this range for quite a while," says Rick Allen of loan site Mortgage Marvel.

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Rates on five-year adjustables were even lower at 2.74% -- $90 a month cheaper than a $200,000 30-year fixed. (Those adjustables are now at 2.8%.)

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With fixed rates so low, though, adjustables make sense only if you move before the initial rate expires.

Doubt you have enough equity to refi? Under new HARP rules, you may be in luck if you are current on payments and have a pre-June 2009 mortgage held by Fannie Mae or Freddie Mac.

Rewards of a Refi

Refinancing a 1 1/2-year-old $200,000 mortgage can cut costs significantly.

Original mortgage

Interest rate: 4.84%
Monthly payment: $1,054
Total interest: $179,500

New 30-year fixed-rate

Interest rate: 3.53%
Monthly payment: $898
Total interest and extra costs: $139,800

New 15-year fixed-rate

Interest rate: 2.83%
Monthly payment: $1,360
Total interest and extra costs: $61,300

Notes: Refi costs include interest paid on original mortgage, closing costs amounting to 2% of loan balance (rolled into new mortgage) and 0.7 point.

Source: Freddie Mac To top of page

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Overnight Avg Rate Latest Change Last Week
30 yr fixed4.24%4.32%
15 yr fixed3.25%3.36%
5/1 ARM3.27%3.37%
30 yr refi4.28%4.31%
15 yr refi3.30%3.34%
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