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Mortgage Rates
There are several factors that affect your mortgage rate. One major
factor of mortgage rate movement is inflation. Inflation means a growing
economy and increasing prices of goods and services. A growing economy
means a stronger demand for goods and services, allowing producers
to increase their prices. This therefore results in higher real-estate
prices, higher apartment rents, and higher mortgage rates.
In an effort to reduce inflation and slow down economy, the Federal
Reserve lowers down interest rates, and in the process, decrease mortgage
rates. Although mortgage rates have the tendency to move in the same
direction as interest rates, their actual movements are also based
on the supply and demand for mortgages.
Mortgage rates have a slightly different equation in their supply
and demand as compared to interest rates. This is the reason why sometimes,
mortgage rates move differently from other rates. For instance, a
lender has a commitment to make and is forced to close additional
mortgages. To achieve this, they would have to lower down the mortgage
rates even with interest rates going up.
Other Factors Affecting Mortgage Rates
Mortgage rates are affected by several other factors besides inflation.
Mortgage rates rise up when the amount of the loan increases. This
increase in mortgage rates is especially true if the loan amount exceeds
the established loan limits of Fannie Mae and Freddie Mac. Loan limits
typically changes at the beginning with each year to conform with
the trend mortgage rates are taking.
The length of the loan may also affect mortgage rates. Shorter loans
usually means lower mortgage rates and longer loans can cost you higher
mortgage rates. Loans with a 20-year or 15-year note can allow you
to save thousands of dollars on mortgage rate payments. However, this
also means that your mortgage rate payments every month will also
be a lot higher.
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"Where gold speaks every tongue is silent.”
- Italian proverb
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To avoid this, an adjustable mortgage rate may help you get started
on a lower mortgage rate, but if interest rates grow, your monthly
mortgage payments will rise also. Fixed mortgage rates are usually
higher than adjustable mortgage rates but they can save you money
too, especially if the interest and mortgage rates go up.
Larger down payments can help you save up on your monthly mortgage
rate payments. You can get the best possible mortgage rate with a
down payment that is greater than 20%. Higher mortgage rates are expected
if the down payment is less than 5% since the beginning equity is
smaller and provides less collateral.
Discount points are another way to move mortgage rates. Lower mortgage
rates usually means higher points paid on your loan. The same goes
for closing costs, which are fees that the lender must pay. Higher
closing costs paid to them means lower mortgage rates. However, if
you do not wish to pay for all the closing costs upfront, the lender
will raise your mortgage rate in order to cover it.
The concept is pretty simple. Lenders are usually willing to lower
mortgage rates as long as more money is paid upfront. More money down
means lower mortgage rates. And lesser money down means higher mortgage
rates.
Additional Resources and Latest News:
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Google Shuts Down Mortgage Rate Comparison ToolReverse Mortgage DailyNo longer will consumers be able to google mortgage rate comparisons. As of Wednesday, Google (NASDAQ: GOOG) had fully closed down its Advisor Mortgage platform, a comparison tool previously used to compare rates on mortgages across states. |
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TEXT: Fitch Rates BNZ's Covered Bond Series 7 'AAA'Reuters(The following was released by the rating agency) SYDNEY, February 05 (Fitch) Fitch Ratings has assigned a 'AAA' rating to Bank of New Zealand's (BNZ, 'AA'/RWN/'F1+') Series 7 EUR 500m three-year mortgage covered bonds. The hard bullet bonds are due in ...and more » |
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