An important part of loans is the interest rate. Just like other types of loans, mortgages have an interest rate and are scheduled to amortize over a set period of time, usually from 6 months to as long as 30 years. An interest rate is typically expressed as a percentage of the capital for a period of one year.
A mortgage rate is just the interest rate you’ll pay on your mortgage loan. It is available in different types, as different mortgage loan products carry different interest rates. There are two basic types of amortized mortgage loans: the fixed rate mortgage (FRM) and adjustable-rate mortgage (also called a floating rate or variable rage mortgage). That is to say, mortgage rates are available in two types: fixed mortgage rate and adjustable mortgage rate.
A fixed mortgage rate is fixed for the life or the entire period of the loan. It is a guaranteed amount of interest that you are required to pay on a loan. This rate will neither rise nor fall through the duration of the loan. However, fixed-rate mortgages can change if you are late or fall behind on your payments. So make sure to make payments timely.
Adjustable rate is not fixed and can vary over time. For an adjustable rate mortgage, the interest rate is typically fixed for a period of time, after which it will periodically (usually annually or monthly) be marked up or down.
These two kinds of mortgage rates both have advantages and disadvantages. Fixed interest rates often provide a sense of security. You can make a reasonable plan for your budget when you know how much your payments are. Adjustable-rate mortgages seem to be more attractive, as they usually offer a low introductory rate to attract borrowers. Based on Investopedia, you will probably pay less interest with an adjustable-rate mortgage than with a fixed-rate mortgage. The initial interest rate tends to be from 0.5% to 2% lower than the average 30-year fixed rate.
However, your payment could be inflated by a change in interest rate over the loan period. So, fixed-rate mortgages are better for a long-term loan, as you can minimize your risk against market changes. Adjustable-rate mortgages tend to preferable if you think the interest rate will fall in the future.
The mortgage rate itself is not fixed and affected by a slew of different factors. Generally speaking, inflation is the main factor at work. During inflation, the lenders will increase the interest rate especially on home loans. On the contrary, the interest rate will be lower during deflation.
The mortgage rate can be also influenced by the actions of Federal Reserve and other government agencies. For instance, when the Federal Reserve purchases long-term U.S. Treasury securities or debts to help the economy, sometimes interest rates decline.
Personal factors can also incur the changes in mortgage rates, as lenders depend on them to determine the risk they take by lending you money. Your credit scores are just the most important for lenders to consider whether to offer you a loan. If you have a higher credit score, you may be able to get a low mortgage interest rate. Jumbo mortgages and subprime mortgages, not supported by government guarantees, always face higher interest rates. Other factors include bond field, supply and demand and economic activities.
A Short Peek at Mortgage Rates
Today in the US, there are many mortgage lenders, waiting to help you along the way towards your homeownership. These home loans come with various mortgage rates, and the monthly payments for loans in the same amount could also be various. For instance, Bank of America mortgage rates are mainly determined by mortgage type, amount, borrower’s credit, and property location, so the monthly payments are different for specific mortgage applicants.
To help borrowers know the estimated interest rates that work to their own conditions, rate calculators are created. You just need to enter your loan type, loan amount, preferred repayment term and other required information, and this tool will show you the result. So, for example, if you want to know estimated Wells Fargo mortgage rates that you may qualify for, go to Wells Fargo’s website for its rate & payment calculator.
As we know, the higher interest rate, the more monthly payment you have to pay. Thus, many borrowers are looking for smart tricks to get the mortgage rate down. Actually, lenders do provide opportunities to reduce mortgage rates and make your monthly payment affordable.
For example, SunTrust mortgage rates come in adjustable option, in which the borrower makes lower monthly payment for the initial years, and for the remaining period of the loan, the rate will adjust annually, so borrowers might be able to take advantage of the possible lower rate in the future.
Besides, mortgage interest rates can also be fixed for the entire life of the loan. The major pro is that you can predict the monthly payments. The typical repayment term for fixed-rate mortgages is 10, 15, 20, 25, and 30 years, but this is not always the case, for instance, Chase mortgage rates can be locked in for up to 40 years.
Know More about the Mortgage Rates of Different Banks
People who are seeking for a mortgage need to take the mortgage rates into consideration definitely. The higher the interest rates are, the more your will pay for your mortgage interest. Choosing a good mortgage lender is of much importance. The US Bank mortgage rates are competitive and popular since the bank has a strong financial power.
Apart from the US Bank, HSBC mortgage rates are also great for people on a tight budget. Both fixed rate mortgages and adjustable rate mortgages can be obtained there. What is more, mortgage rates for the 5 year variable closed can reach as low as 2.60%.
TD Bank mortgage rates fluctuate constantly due to several factors, such as, bond prices, property market as well as the government policy. Similar to TD bank, USAA mortgage rates also changes very often. If you are planning to take a mortgage from these two banks, you had better keep a close look on their mortgage rates listed on the web.
Guide to Fixed Rate Mortgage
Fixed rate mortgage is a most popular aid for modern Americans to get their homes. There are many types of fixed mortgages to meet the diversified demands of different customers. Lack of money? 30 year fixed mortgage rate will form a good option, since they are allowed to pay off the loan in 30 years and the monthly payment is pretty low. Want to get home ASAP? They can choose a 15 year fixed mortgage rate, a big advantage of which is that homebuyers can get their houses in only 15 years. Besides, the interest rate of this kind of mortgage is pretty low.
Apart from fixed rate mortgage, there are other mortgages, like jumbo mortgage and ARM. For any mortgage they get, home buyers will have many options in regard to terms. 15 year rate mortgage of any kind is pretty popular for its short term and relatively low interest rate. It also appeals to those who want to refinance their current homes. Comparatively, 30 year rate mortgage is not as common among Americans as the 15 year one, since many people don’t want to wait so long to get their home, not to say the high interest rate. However, it is still welcomed by budget buyers and young couples who intend to stay in their home for long.