Home Mortgage Interest rates are one of the single biggest factors when choosing a home mortgage. Generally, the lower the interest rate is, the better the home mortgage is, but it really depends on the type of mortgage you choose and such factors as the loan to value ratio, and the fees and points charged by the lender. It is important to shop around to find the mortgage and mortgage interest rate that's right for you. You should contact lenders at banks and credit unions as well as mortgage brokers to find the best rate for you.
You will have to choose between a fixed-rate, adjustable-rate or balloon/reset mortgage.
Fixed-Rate Mortgages- The interest rate for a fixed-rate mortgage never changes for the life of the loan, so your monthly principal and interest payment always stay the same.
Adjustable-Rate Mortgages- The interest rate start with a low interest rate. After the initial period when the interest rate doesn't change, the interest rate will often adjust each year.
Balloon/reset mortgages- They have monthly mortgage payments based on a 30-year amortization schedule, and you have a choice at the end of the 5- or 7-year term to either pay off the remaining balance or reset the mortgage.
You will also have to choose your loan terms. Keep in mind that the lowest mortgage interest rate or longest loan term may not always be the best choice for you. Most home mortgage lenders offer two basic terms: 15 and 30 years, and many also offer 20-year fixed rate mortgages.
This term has higher monthly payments because the loan is shorter. The interest rate is usually lower and you can build equity faster.
- 20-Year Term
This fixed-rate mortgage builds equity more quickly than with a traditional 30-year mortgage as well as saves you interest over the life of your loan.
- 30-Year Term
Interest rates may be somewhat higher for this term and you pay more interest over time.
Home Mortgage Interest rates change frequently. With many lenders, you can "lock in" the rate, which allows you to complete the mortgage process knowing the exact interest rate you'll get for the life of the loan if the loan is a fixed rate or for the initial period if the loan is an ARM or a balloon/reset mortgage. If you believe home mortgage interest rates will increase while your mortgage is being processed, you might lock in the current interest rate through your closing date. A typical lock-in lasts 30-60 days.
If you choose not to lock in your rate, you can "float" the rate. This means that you can follow market rate trends and choose to lock in when the home mortgage interest rates are more favorable. However, you will have to lock in your rate at the end of the float period, which is usually 72 hours before closing. Even a fraction of a percent can make a big difference in your mortgage payment, so you'll want to shop around and compare rates and is one of the most suitable mortgage rates.