If you are looking to buy a new home, you may not realize just how important it is to know the up to date mortgage rates in your area, or the area you are thinking about moving to. One of the first things to consider is the interest rates; over the span of a 30 year mortgage, the interest may be higher than the actual base principle. Interest rates can have a huge impact on how much a house will cost overall, than the actual buying price. Understanding these numbers is imperative, so that you don’t end up paying more than you’d estimated. While a mortgage company can help explain the ins and outs of current mortgage rates in depth, here are a few things you can start out with.
Payments
As a rule, higher interest rates mean spending more money in the long term. For instance, if you take out a $300,000, 30 year mortgage with a 3.5% interest rate, you can expect to pay around $484,968 over the course of the entire mortgage. The interest adds up to $184,968 in additional debt. While the monthly payments might not be outrageous, it’s worth considering how much extra you’ll be paying due to the interest. Additionally, if the interest rate increases over the life of your mortgage, you can expect the overall number to increase dramatically, even if your monthly payments aren’t terribly affected. Additionally, there are also sites online that can provide up to date mortgage rates for the area you’re planning on moving to.
Knowing a Loans APR
Interest rates aren’t the only thing to take into consideration when it comes to comparing mortgage loans. If you’ve bought a home before, you may know that there are loans that require an upfront payment, and there are those who require nothing as an upfront cost, though those types of loans may come with higher rates in the long term. The best way to compare is to look at annual percentage rates, this will tell you the loans interest in the form of a single annual sum. Knowing this can help you make an easier decision on what would work best for you. If the loan does not specify this, it may be worth asking mortgage lenders for the information, as it can be very important to know.
Amortization
For a lower rate, see about a loan that entitles a lower amortization period. 15 year mortgages for instance, not only allow you to pay off your home more quickly, but as it is seen as less of a risk for the bank, they may offer a lower interest rate. The downside to this is that the monthly payments will be higher, even though the savings will be in the long term. This comes down to personal finances, and preference. Even though you save money over all, for some people higher payments aren’t entirely feasible. This is just another reason why extensive research is essential in order to get the most out of you mortgage, while not biting off more than you can chew.
Adjustment Factors
Adjustment rate mortgages, or ARMs, come with factors that you will also want to consider. While some have beginning periods where the rate will not increase, different loans will varying in how often a loan increases and adjusts over the course of a year. If an ARM is able to adjust only 1% with a limit cap of 6%, than it can be viewed as a better option in the long term, than an ARM that has monthly adjustments or no limit.
Knowing the up to date mortgage rates, in addition to how to navigate the ins and out of the mortgage loans and interest, can go a long way to getting you the best deal, and saving you money in the long term. I’d urge you to speak with a mortgage company about what would be best for you, and try to stay up to date mortgage rates as much as possible while you are looking for the perfect home.