Mortgage Rates
Mortgage rates are the interest rates charged for loans of money used to purchase real estate, be it residential homes or commercial property. Mortgage rates vary depending upon financial market conditions, the demand for housing, one’s personal creditworthiness, and government interventions in the mortgage market.
Relatively small differences in mortgage rates have large effects upon one’s monthly mortgage payments and total cost of home ownership. People shopping for homes tend to pay close attention to mortgage rates and time their purchases to obtain what they feel is going to be the lowest mortgage rate. They also shop many sources of mortgage loans to secure one with the most favorable rate.
Bank mortgage rates tend to be lowest in general, but that is because banks take the fewest risks. Banks may insist on large down payments, spotless credit history, and unusually stable employment record.
People generally go to banks for a fixed mortgage rate – one that remains the same throughout the life of the loan, lending predictability to the management of one’s monthly expenses. But a fixed mortgage rate has to take into account the possibility that interest rates will rise in the future, and so it often includes extra percentage points that are not justified by current market conditions. When it becomes apparent that the fixed mortgage rate is too high, people often seek to refinance mortgage rates.
Refinance mortgage rates are set lower than prevailing fixed mortgage rates to tempt mortgage holders into switching lenders. If you are paying 8 per cent to Bank A, Bank B may offer you 6 percent for a period of two or three years to induce you to switch over. Just make sure you understand what the mortgage rate will rise to after the introductory rate expires.
Most mortgage loans are made for a period of 30 years, even though few people remain in one home that long. The longer a loan’s period, the higher the interest rate must be to cover the uncertainty of long-term predictions about future market conditions. So a shorter term mortgage is a way to get a lower mortgage rate, if you can find a lender who will give you a 10 or 20 year loan. Of course, paying back $500,000 in less time means higher monthly payments, but you will save a lot in interest charges.
A home mortgage rate is often the key variable in a household budget. Shop long and thoroughly before committing to a mortgage.