Mortgage RatesFinancial Dictionary -> Mortgages -> Mortgage Rates
Understanding Mortgage Rates
When a borrower seeks financing for a real estate property, either for business or residential purposes, he has to obtain it from any financial institution. The latter can be a bank, a credit union, or a corporation. When a person or firm enters into a mortgage contract with a lender, they agree to pay the face value of the loan, including interest, at maturity date. This period can vary from a few years to several decades (5 years to 30 years).
Bear in mind that lenders compute interest charges based on mortgage rates. The latter can vary depending on factors such as the amount of money borrowed, the credit score of the borrower, the institution which granted the loan, its term, etc.
Things to Consider
First, mortgage rates differ depending on various factors, the prime one being the credit score. If the potential borrower has a poor credit rating, he poses financial risk and is offered higher interest rates. Conversely, lenders are more than willing to offer their best mortgage deals to borrowers with excellent credit rating and impressive credit history.
While the above holds true most of the time, individuals with poor credit history should still shop around. Some credit providers are willing to offer lower interest rate loans to customers with tarnished credit history. It may take some time and effort, with the lender requiring that you pay a higher down payment or have a cosignatory as a precondition for granting the loan.
Using the Internet
The Internet is a huge source of information on mortgage rates. Because a large number of lenders have established a presence online, it is much easier to compare mortgage rates than before. Before you apply for a loan with any lending institution, make sure you get as much information on home mortgage rates. For instance, it is important to know that these come in two main types: fixed and adjustable mortgage rates. Both have their pros and cons, the first one typically coming with a term of 15 or 30 years. The interest rate is quite high, compared to the adjustable mortgage rate because of the higher risk involved in lending. This mortgage rate is more popular in USA.
The adjustable type changes after a set period of time, and the loan term is shorter. You will be able to save money if the present mortgage rates are expected to decline. The adjustable mortgage rate is the preferred option of the citizens of Canada and the United Kingdom. There is one rule of thumb to remember: the shorter the loan term, the more you save in interest rate.
In all cases, there are other mortgage rate types such as reverse mortgage rates, assumable mortgage rates, interest-only mortgage rates, and others. You can opt for lowest financial foreign exchange rates if you think they will serve your needs better. Just do your homework and choose the best option. If math is not one of your strengths, use a mortgage rate calculator. It will help you determine whether the house you are about to purchase is within your means.