With all the current chatter about mortgage interest rates, we understand if you are feeling like maybe buying a house just isn't in the cards for you. It can be pretty confusing. But hold on! A better understanding of interest rates might make you feel a little better. After all - knowledge is power right?
Ok. Let's start at the beginning. A mortgage rate, or mortgage interest, is part of what it costs to borrow money from a lender. Instead of paying your mortgage lender a lump sum, the interest is paid as part of your monthly payment for your home loan.
Mortgage rates can be as unique to you as your fingerprint.
The term, length of time it takes to pay off your loan, and type of mortgage
you have affects your monthly interest rate. And your personal financial
situation will help determine if you're eligible for a lower rate.
There are two main types of mortgage loans - Fixed Rate Mortgages and Adjustable Rate Mortgages.
A Fixed-Rate Mortgage provides you with a consistent interest rate for the life of your loan. This means your monthly payment will be consistent as well. A fixed-rate mortgage generally has a higher interest rate than the initial interest rate on an Adjustable-Rate Mortgage.
An Adjustable-Rate Mortgage has a fixed introductory rate that stays the same for a set period of time, such as 5 or 7 years, then may change periodically. This means your monthly payment could increase considerably after your introductory period is over. Thankfully, rate caps exist to limit the amount your interest rate can rise.
What else can affect mortgage interest rates? Well, a lot of things that aren't really in your control. These include:
- Strength of the economy.
- Employment rates.
- Housing market conditions.
- Stock and bond markets.
- Federal Reserve.
- Inflation rates.
The good news is that, while you can't control external factors that determine your rate, there are ways you can find an affordable mortgage rate.
So don't give up on your dream of owning your own home. Just keep in mind that your path to homeownership will be as unique as you are! Get in touch with a lender at Telhio Credit Union who can answer your questions and make the process as easy as possible. And get ready to shop for welcome mats!