Mortgage Services

Part of your monthly mortgage payment goes to the interest on the principle. The amount of the interest, or interest rate, is set when you are setting up a mortgage. Many factors can influence mortgage interest rates, the going rate, your credit history, whether you pay "points" all can affect the best interest rates. The best thing for you to do is to compare mortgage interest rates, either through the Internet or the paper. If you have been having financial difficulty, it is possible to get a bad credit mortgage, but plan on having a higher interest rate. This article will look at some points that determine your interest rate.

What Is Interest?

First off, what is interest? Interest is the payment to a lender for lending out money for homes, cars, and other goods. A fixed interest rate loan is one in which the interest rate stays the same over the life of a loan. So if you sign on a loan at 5%, that rate will not change. You'll still be paying 5% and the end of the loan. An adjustable rate mortgage, or ARM, is a loan that will start at a certain percentage, then after a predetermined amount of time, say 5 years, the interest rate changes up or down depending on the current rates. There is a little more risk associated with this type of mortgage, because the rates may go up quite a bit, leaving you with a higher monthly payment. Talk to your broker or banker to see if this option may be right for you.

Deciding Factors

There are many factors that influence mortgage interest rates. One is simply the state of the economy. Like everything, mortgages are supply and demand. During good years, interest rates are a bit higher as more people are refinancing or getting their first mortgages. During lean times, interest rates go down a bit as lenders try to get more reluctant people to borrow. Another entity with influence over interest rates is the Federal Reserve Board. The Fed sets the interest rates banks charge when they loan money to one another, so indirectly the mortgage rates too.

One way to get your interest rate down is to pay part of the interest in advance. This is called paying discount points. Each point costs 1% of your loan amount. Typically, one full discount point will lower your fixed rate .250%, or your variable rate .375%.

A way to always insure you get a good low rate is to keep your credit score as high as you can. A lower score will affect you adversely in the form of higher rates, or in the worst case, the inability to get a loan at all.

Mortgage Services |