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Mortgage Rates
There are several indexes on which mortgage rates are based:
- The Prime Rate is often given by lenders to corporations, large businesses
and to the most credit-worthy applicants. This index is characterized by its
stability, and it does not usually vary from bank to bank. Also, the Prime
Rate can be used to predict future trends in rates. The direction of rates
associated with consumer loans often follows the lead of this index.
- U.S. Treasury Security Yields is published yearly by the Federal Reserve
Board and is one of the indexes used to decide adjustable mortgage rates.
This index is comprised of an average of monthly rates during the length of
a one year U.S. Treasury security.
- The 11th District Cost of Funds is also often used to determine adjustable
mortgage rate, and it generally rises and falls along with the average of
a one-year U.S. Treasury security. The 11th Federal Home Loan Bank District
publishes a weighted average mortgage rate monthly. The 11th District Cost
of Funds uses the states of California, Nevada and Arizona to calculate this
weighted average.
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Imperfect Credit
Federally insured loans are also a good way for you to find bad credit mortgages
that have good terms. FHA loans as well as VA loans are good examples of these.
A federally insured loan offers:
- low interest rates
- little to no down payments
- Relaxed qualifying criteria
- Tax deductions on interest payments.
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Home Construction Loans
Interested in building your new home? There are lenders that will finance 100% percent of the cost for materials, labor and land. Apply today to contact up to four lenders about your home construction loan.
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Rates
There are generally two types of loans. A fixed loan or an adjustable loan. A fixed rate loan gives you the security a constant rate throughout the life of the loan. Since your rate will not change, your monthly payments will often remain the same during your repayment period. An adjustable rate mortgage rises in falls along with the fluctuate of certain rate indexes. As your loan repayment period goes on, your monthly payment will change as you interest rate changes. Generally an adjustable rate will change every one to five years. Because it is susceptible to change, an adjustable rate loan caries more risk and is usually used by borrowers with less than perfect credit and those planning to move between five and seven years. However, adjustable rate loans come with low introductory rates and rate caps. Depending on the activity of current interest rates, a person with an adjustable rate could actually save money.
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Mortgage Calc
A mortgage calc can also show you the difference that the term of your loan makes on your repayment schedule. A $997 monthly payment on a $150,000 loan at 7% over the period of 30 years with $209,263 in total interest may sound acceptable, but using the calculator you can compare this monthly payment to what would be paid on a shorter term loan. The same loan with a 15 year term would have higher monthly payment of 1,348, which is $351 more. However, the 15 year term would cut the total interest in half to the amount of 92,683. In this case, cutting your loan term in half and paying $351 more a month could save you over $100,000.
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Mortgage Refiancing
It is also possible to refinance your home loan for a higher amount than the previous mortgage, leaving you with money left over. This is called cash-out refinancing. When cash-out refinancing the amount of money borrowed above what is owed in the first mortgage is borrowed against home equity. Home equity is the value of your house that remains after the current mortgage is subtracted from the current market value of the home. Lenders will often let homeowners borrow up 85% of this equity in addition to the amount of the original mortgage.
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Refinancing Your Home
Also, if you are refinancing to change terms or to take cash out to cover a major purchase and are not as concerned about your rate, money down can be exchanged for an increased interest rate. Generally this is when a homeowner pays, or does not pay, the points that can affect the loan’s interest rate. One point is the same as one percent of the loan. On $100,000 loan, one point would be $1,000. Usually, each point unpaid adds 1/8 to ¼ of one percent to the interest rate. Depending on the borrower’s priorities, points may be paid or a higher interest rate may be taken. Borrowers should be careful of lenders offering refinancing that includes no points. This often means that higher interest rates are built in.
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