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Mortgage Rates

Mortgage rates change and so should you; learn how to adjust to a volatile market

Mortgage Rates- The Fear Factor

Mortgage rates- Feeding The Powers That Be

The term mortgage rates relates to the interest you'll pay upon assuming your mortgage loans. As stated in the home mortgage section of My First Mortgage, mortgage rates are comprised of two dominant categories: fixed-rate mortgages and adjustable-rate mortgages. In a fixed-rate mortgage the interest is constant, a set percentage throughout the mortgage term agreed upon by you and your lender at the time of the loan. Adjustable-rate mortgages (ARMs) have lower introductory mortgage rates than fixed-rate mortgages, but after a set number of years the interest rates adjust-up or down-according to general financial indices. Sounds simple, right? It never is.

Stop The Presses! There Are Mortgage Rate Details!

Unfortunately for the majority of home buyers out there, there are underlying details to every aspect of your mortgage, specifically concerning your mortgage rates, that are available for you but difficult to find and even at times more difficult to comprehend. Before you give up, or even jump in with the first great mortgage rate you find of the web, My First Mortgage would like to show you some details about mortgage rates you may not have known, but should definitely know...

  • Points- Points are purchased from the lending organization to buy down the interest rate on your mortgage. One point is generally one percent of the loan amount, and in turn the more points you purchase the lower the mortgage rates. Points save money on interest in the long run, but add to the costs of your initial payment. Some lenders strongly encourage the purchase of points, others are more lenient.
  • Locking a loan vs. floating a loan- Before the mortgage loan is ever a reality, your lender will give you the option of locking the loan at its current interest rate until you assume the mortgage or floating the rate, allowing it to fluctuate with local mortgage rates until the time of the actual loan. Like an ARM, floating a loan is a risk, but the potential for depressed mortgage rates are always present.
  • Front-Loaded Interest- When you use a mortgage calculator and look at your amortization, you may notice that the majority of your early payments are paying off interest rather than the actual loan itself. The lenders are paid before the house is paid for. Because mortgaging is a business, after all, and the lenders always want to be assured they are paid. This is called front-loaded interest. If you take a fixed-rate mortgage and live in your home for years, front-loaded interest will be of little consequence; you would pay the interest eventually. But if you're considering moving only a few years after purchase, it's important to know your mortgage rates and see how much interest you will actually pay before you have the opportunity to sell.

New home buyers; this is not to scare you away. My First Mortgage is here to show you the realities and associate details of your first mortgage and the home mortgage rates you will have to pay. The more you know, the better prepared you will be to tackle this important, life-defining investment. Knowledge is power. Empower yourself.

Rate hikes - looking up the mountain

Knowing which home loans are guaranteed to carry higher interest rates is very important; you can make assumptions and preparations for increased rates, or avoid excess cost altogether:

  • a bad credit mortgage will carry higher rates because of the increased risk you pose to the lender. In 2004, 2.4% of all prime loans were considered past due, for bad credit loans that number was 10.04%. You can see the difference and so can the lenders - bad credit will equal higher rates.
  • A lower down payment will also create a higher interest rate for your loan. The very greatest rates are reserved for people who put down a 20% payment, anything less and the rates climb accordingly.

there are several other factors which can increase your mortgage rates, and means to get around them.


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