Home loan rates are based on a lot of things. The economy, the country’s overall health, changes in mortgage interest rates and the creditworthiness of the borrower. All of these things can affect how much a loan will cost or how long it will take to get one. Many borrowers do not understand the implications of these factors and end up paying more than necessary for the home loan they want. Here is what you need to know.
The first thing that is considered when the term of a mortgage is extended is the borrower’s credit score. In fact, it may even be the first thing that is looked at when extending the terms of the loan. Lenders look at credit scores to see if the borrowers will be able to pay the monthly installments. A low score means that the borrower is a high risk. If a lender extends the term and there is a high possibility of non-payment, the lender will have little choice but to charge a higher interest rate to compensate himself for the increased risk.
Home loan rates are also determined by the type of mortgage. There are several types, with varying term lengths and repayment schedules. Interest rates for adjustable rate mortgages, for instance, are based on a floating APR, which means the rate can change. If the interest rates go up, so does the APR.
Mortgage lenders also look at the down payment that borrowers have compared to the income potential. If there is a large amount of money that must be paid up front for the home, the interest rates may be lower. But if there is not much money down and the down payment is lower, then the interest rate may be higher. It all depends on the situation. Some lenders have strict guidelines on what they will not do; hence, the rates they will offer may be higher or lower.
Shop around first before deciding on one lender. You can talk to different types of loan lenders in your area and find out their different types of offers and their corresponding terms and conditions. Also, take note of their rates and fees when you research them. Compare them to find out who can offer you the best home loan rates, terms, and conditions.
Once you’ve compared the different types of home loan rates from different lenders, make sure you shop around the same lenders for the second mortgage. Lenders usually offer attractive rates to secure the loan, so it’s in their best interest to offer you the lowest rates and fees possible. If this means shopping around, do it. The advantage of getting a mortgage from two different lenders is that you can choose a fixed-rate home loan interest rate instead of an adjustable-rate mortgage, and you can choose a low-risk or a low-interest plan.
Home owners with good credit history should be able to secure home loans at competitive interest rates. However, if you have bad credit, there are still several ways to get lower home loans. For starters, you can apply for a mortgage refinancing. This allows home owners to combine their current loans into one low monthly payment and also lowers the overall cost of financing. Refinancing requires good credit, but if you manage to make your payments on time and in full, you can improve your credit enough to qualify for a good refinancing deal.
If you’re unable to refinance because you don’t have enough home equity, you can always consider a home equity line of credit. A home equity line of credit (or HELOC) is a debt-like loan where you put up the property against the money you want to borrow. Homeowners can use a HELOC to pay off high-interest debt or buy expensive items such as laptops and luxury cars.