In Massachusetts, the current average for a 30-year fixed-rate mortgage is 4.87%. The 15-year fixed-rate averages at 4.33%, while the 5/1 adjustable-rate mortgage (ARM) average is 3.90%.
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Mortgage rates are always changing in response to market movement and adjustments in monetary policy. Sometimes, this makes it hard to know whether it's the right time to refinance or borrow for a new home. We studied home loan rate trends and averages in the Bay State to help you understand what's going on and how to search for a good mortgage.
How Much Do Massachusetts Mortgage Rates Vary?
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At the moment, Massachusetts home loan rates have a spread of 150 basis points. For a 30-year mortgage, rates can range as low as 3.88% or up to 5.38%. To put these rates in real terms, we can apply them to a hypothetical purchase.
If you had a mortgage balance of $180,000 to repay over 30 years, you'd see a difference of $51,702 in total interest between the highest and lowest rates. Each month, that would make a difference of $144. Though closing costs and service fees are also important, these numbers show that there are significant financial stakes in finding the right mortgage rate.
Comparing Home Loan Rates by Bank
Mortgage rates can also vary depending on where you get your quote. In Massachusetts, the range of possible rates among the state's largest banks was wider than usual.
In most states, the largest mortgage lenders tend to match each other closely in rate, but the market in Massachusetts proved to be more diverse. Applied to the scenario given above, the spread between the highest and lowest rate results in a monthly difference of $77 in principal and interest. Over a full 30-year amortization schedule, this expense gap widens to $27,400.
Are Home Loan Rates Rising in Massachusetts?
Along with the rest of the country, Massachusetts will likely experience higher mortgage rates in the near future. Current predictions forecast an 81.1% chance that the Federal Open Market Committee (FOMC) will vote to increase national interest rates at their next meeting on December 19, 2018.
Given that the FOMC typically aims to raise rates by 25 basis points over the early part of next year, Massachusetts's average mortgage rate of 4.87% may rise a similar amount. Such a change would grow the cost of a 30-year, $200,000 mortgage by $22 per month and by $7,884 over 30 years.
For first-time homebuyers, life stage considerations are often more important than interest rate conditions in determining the timing of a loan. In other words, you shouldn't feel pressure to wait for the "perfect" mortgage rate if other factors are already aligned for a home purchase. For now, home loan rates are still very low compared to historical averages. However, you should be more attentive to rate changes if you're an existing homeowner thinking about refinancing.
Comparing Home Loan Rates in Massachusetts Cities
Our analysis of rates also covered local conditions in Massachusetts' largest metro areas. In the Bay State, local real estate values tend to have a bigger impact on local mortgage costs than rates, which are similar in all cities. Massachusetts metros also recorded a significantly higher median home value than cities of similar size in the rest of the country.
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Because interest rate works in conjunction with loan amount, it's important to account for both factors before you make a judgment on the cost of a home loan scenario. While rates may be predetermined by your credit history and assets, there are a number of strategies you can use to ensure that your loan expenses align with your financial goals.
Evaluating Mortgage Options: An Example in Boston
As the political, economic and cultural center of Massachusetts, Boston experiences particularly high demand for real estate and mortgage financing. We can use a hypothetical home purchase of $450,000 in Boston to illustrate the options you have for adjusting the costs of a mortgage.
The 30-year fixed-rate loan is by far the most popular type of mortgage, frequently with a 20% down payment. At an average rate of 4.80%, such a loan leads to monthly principal and interest of $1,889 and a lifetime cost of almost $320,000 on interest. However, taxes and insurance would increase these monthly expenses. In addition, homeowners who put down less than 20% would pay more overall interest.
If either the rate or the down payment of a standard 30-year mortgage is too high, you might opt for a government-assisted program such as the FHA loan for first-time homebuyers. With a 3.5% down payment minimum—just $15,750 versus $90,000 in the first example—FHA applicants can reach for larger purchases than they might in a conventional loan. However, the addition of FHA mortgage insurance represents another added cost to consider.
Finally, homeowners with the means and willingness to minimize what they spend on interest can choose to take a shorter 15-year mortgage. By accepting higher monthly costs, 15-year mortgage borrowers access better rates, build equity quickly, and reduce lifetime expenses. For our example, switching to a 15-year mortgage from a 30-year loan saves over $191,000 in total interest but boosts monthly payment up to $2,716.
Lowest Massachusetts Mortgage Rates
If you're ready to look at quotes from actual mortgage lenders, the table below offers a preview of home loan rates in Massachusetts in ascending order of APR. These estimates are based on Boston rates and an estimated home value. Your own figures will vary depending on location.