Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

Full Bio →

Written by

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

Full Bio →

Reviewed by Joel Ohman
Founder, CFP®

UPDATED: May 14, 2012

Advertiser Disclosure

Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.

In the first quarter of 2012, more than 95 percent of home loan borrowers took out fixed-rate mortgages, according to Freddie Mac’s Quarterly Product Transition Report. The report revealed that refinancers preferred fixed-rate home loans, regardless of whether or not their original financing was fixed or adjustable.

Fixed-rate mortgages are touted by home loan experts as being the safest and most responsible way to finance real estate. Adjustable-rate mortgages (ARMs), on the other hand, are usually reserved for seasoned investors who hope to pay off the entirety of their loan within a short amount of time.

However, many are drawn to ARMs due to their extremely low initial interest rates. But what some fail to realize is that ARM’s interest rates “adjust” depending on the index their tied to. So those attractive initial rates rarely remain the same. Instead, some find themselves owing much more than they originally expect just a few years down the road.

Some experts claimed the public’s lack of education on ARMs played a part in the popping of the home loan bubble in 2008.

But given the extremely low interest rates on fixed-rate mortgages, many are opting to settle for these safer alternatives to volatile and risky ARMs.

“Fixed mortgage rates averaged 3.92 percent for 30-year loans and 3.19 percent for 15-year product during the first quarter of Freddie Mac’s Primary Mortgage Market Survey, well below long-term averages. The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5.1 percent during the first quarter of 2012,” said Frank Nothaft, Freddie Mac’s vice president and chief economist, in a news release. “It’s no wonder we continue to see strong refinance activity into fixed-rate loans.”

Additionally, a full 31 percent of those who refinanced reduced their 30-year terms to either 20-year, 15-year, or 10-year home loans.

“Compared to a 30-year fixed-rate mortgage the interest rate on a 15-year fixed was about three-quarters of a percentage point lower during the first quarter,” said Nothaft. “For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term.”