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For some local home borrowers, shorter mortgages

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Three months ago, the National Institutes of Health Federal Credit Union in Rockville began offering five- and seven-year fixed-rate mortgages.

Since then, the credit union has originated about 100 such loans totaling $10 million, accounting for about 20 percent of the bank’s monthly mortgages.

“We’ve put millions on the books already, and it’s blossoming,” said Juli Anne Callis, president and chief executive of the credit union. “They’re very popular right now, at least in this area.”

As baby boomers pay off their first homes, area banks and credit unions say they’re seeing a rise in the number of second-home and vacation property purchases, many of which are being financed with short-term loans.

“We call it the ‘goodbye mortgage,’ ” Callis said. “People are saying ‘The house is paid off, the kids’ college is paid off, I really can afford to buy — and pay off — that dream home in Florida, too.’ ”

Banks across the region say they have made more mortgage loans in the past year, as interest rates dipped to less than 4 percent.

The Mortgage Bankers’ Association does not specifically track short-term loans, but said that the number of overall mortgages in June was up 23.7 percent compared with the same month last year.

Among credit unions, the number of fixed-rate mortgages with terms of 15 years or less increased by 82.4 percent since last June, according to data from the National Credit Union Administration.

“If you have a lot of equity and you’re planning on retiring somewhere in California or somewhere in Florida, what a great way to buy a second home when rates are so affordable,” said Richard Hutchison, chief mortgage officer of Virginia Heritage Bank.

“My wife and I might want to retire in Key West,” he continued, “so why wouldn’t we take advantage of a depressed market in Florida and a low interest rate?”

There’s another demographic that’s flocking to shorter-term loans, too, Callis said: Younger home buyers who are wary of being saddled with decades of debt.

“It’s almost like back-to-the-future,” she said. “We’re going back to that G.I. generation mentality. People want to pay off their loans as quickly as possible and get those mortgages off their backs.”

Even so, the 30-year fixed-interest-rate mortgage continues to be the most popular option. In July, it accounted for 86 percent of all new mortgages, according to data from the Mortgage Bankers Association.

In keeping with broader national trends, some banks, such as London-based HSBC, said there hasn’t been a discernible demand for shorter loans.

“It’s not something we’re seeing our customers ask for locally,” said Michael L. Privitera, senior vice president of the bank’s Mid-Atlantic district. “That client who is looking to buy a second home before retirement is still a very niche market.”

Bill White, vice president of residential loans at the NASA Federal Credit Union, said customers haven’t requested five- or seven-year fixed-rate mortgages yet, but that he has noticed that some have been paying off their 10- and 15-year loans early.

“People are aggressively trying to pay those off,” he said. “They have a retirement date in mind.”

3.55%, 2.86% 30- and 15-year fixed mortgage rates for the week ending Thursday, according to Freddie Mac.

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