Record-low mortgage rates will put a spring in your step

Hand holding picture of house against landscape

Spring is here, and that means home-buying season is about to kick into high gear.

There's good news if you're looking for a home loan (or looking to refinance your existing one): Winter failed to cool off interest rates, which are a bit cheaper on average today than they were in December.

A typical 30-year, fixed-rate loan costs a bit more than 4%. At this time last year, you would have paid close to 5%.

But you can find a much cheaper deal when you search for home loans in your area in our extensive database of the best mortgage rates from hundreds of lenders.

You’ll find 30-year loans for as little as 3.75% in many parts of the country, with no points and application fees of less than $2,000.

At that interest rate, you’ll pay just $463 a month in principal and interest for every $100,000 borrowed.

Our mortgage calculator will show you what your payments would be for any fixed-rate loan.

Of course, you can do better than 3.75% if you're willing to take out a shorter-term loan.

Thirty-year, fixed-rate loans are appealing because of their low monthly payments, but they have higher interest rates than shorter-term home loans.

They’ll also cost you much more in interest over the life of the loan.

If you’re refinancing rather than purchasing, a 30-year loan has additional disadvantages.

It starts your loan term over and sets you back to making payments of mostly interest and little principal. That means it will take you longer to accumulate equity in your home.

Refinancing into a shorter-term loan can help you pay off your loan faster -- or at least not set you back as far.

Use our 15 years vs. 30 years mortgage comparison calculator to compare your payments and the total interest you'll pay over the life of the loan.

Right now, you can find 15-year loan rates in our database for less than 3%.

Of course, choosing a 15- or 30-year loan isn't your only fixed-rate option.

Bank of America, for example, offers 10-, 15-, 20-, 25- and 30-year fixed terms on conventional mortgages. Chase offers 10-, 15-, 20-, 25- and 30-year fixed terms.

Chase even offers a 40-year loan. But that's a terrible idea.

The monthly payments are barely lower than the payments on a 30-year loan, while the total interest you’ll pay is much higher.

What about the other options?

Let’s look at one example of what it would cost you for a $100,000 loan. (This example doesn't necessarily reflect the interest rates you'll find in your town.)

Home Loan Options

Term Mortgage rate Monthly payment Total interest
10 years 3.250% $977.19 $17,262.83
15 years 3.375% $708.76 $27,576.77
20 years 3.875% $599.41 $43,859.35
25 years 4.000% $527.84 $58,351.05
30 years 4.125% $484.65 $74,437.90

When you cut your loan term in half, your monthly payment doesn’t double like you might expect. That’s because the interest rate falls substantially.

Right now, the difference between a 30-year and a 15-year loan is about 0.75%.

For every $100,000 borrowed, going from a 30-year loan to a 15-year loan would only increase your monthly payment by $224.11. And it would save you nearly $50,000 in interest in the long run.

You’ll also have the satisfaction of owning your home free and clear after just 15 years.

Imagine it: Life without a housing payment and extra cash each month to spend or save as you please.

But if the payments on a shorter-term loan would be too much of a stretch, don’t jeopardize your finances. Choose the term you can comfortably afford.

While you won’t get the lower interest rate, you can still pay off your mortgage early.

Just send in one extra monthly payment a year and ask your lender to apply it to your principal.

You’ll still shave several years and thousands of dollars in interest off your loan.

You can follow on Twitter and Facebook.