Borrowers know a mortgage rate makes a big difference. It is the most significant contributor to the cost of obtaining a house loan. Furthermore, many lenders take advantage of their power to determine the mortgage rate by inflating the figures. For that reason, you need to be prudent when looking for a mortgage to settle for. Here are some of the hacks you will need in order to make a productive comparison of mortgage interest rates.
Sources of Mortgage Interest Rates
Before making a comparison, you need options to consider. So, where do you get the figures to compare?
- Local Mortgage Providers. Before going far for your search, start at home. The local providers are a good source of interest rate information. Talk to each of the ones near you. After getting the details, make a list of the figures you got. Sort them out in any order and drop the least competitive rates.
- The internet is also a good source of interest rate info. Do your research online well. There are many well-recommended mortgage providers online. If you are unable to establish them, you may as well look out for rating companies for mortgage providers. These companies rank performing mortgages according to their interest rates and other factors.
A word of caution, though; be careful with the information you get online. Ensure you don’t fall victim to false information. Some of the most trusted sources of mortgage information include Zillow.com and Bankrate.com. There you will find trusted information. There are many other helpful sites.
- Visit your bank. Some banks also offer mortgages. But, before choosing to settle for a mortgage from a particular bank, ensure you have compared it to other institutions. The only good thing is that a bank may offer you a lower interest rate than the market would because you are their client. They, too, are a good source of mortgage interest rates information.
Once you have the rates, it is now time to make the actual comparison. Here are the tips:
1. Down Payment Rates
This is the initial amount payable before the mortgage is disbursed. Sometimes, this amount is withheld from the total amount given out as a mortgage. Conventionally, lenders ask for a 20% deposit of the purchase price. The 20% is not static as it may rise or fall depending on the risk factors surrounding you as the borrower.
When 20% drops, it is considered a higher risk. The reverse is true. A higher mortgage interest rate of the purchase price is interpreted to be a low-risk housing finance loan. When the down payment gets as low as 5%, you are most likely going to pay Private Mortgage Insurance (PMI).
Therefore, when the time comes to making the final decision, you need to settle for a rate that is likely to cost you the least.
2. Fees
Every mortgage comes at a cost. From the start, there are many fees charged by mortgage companies. As you look for this information, ensure the source gives you all the details or else drop them. It is good to establish if there are any hidden charges or fees not declared. The moment you find out if there is any, don’t hesitate to walk away.
A right mortgage provider for Instant cash loan singapore should be open and declare any charges they impose on clients. For the unethical ones, they do not declare fees from the word go, but go ahead and charge them. This is unacceptable and should raise an alarm. Probably, in the future, you are likely to be charged hidden fees. Therefore, you may end up paying more than what you consented to.
3. Locking
Providers are willing to do anything to win customers. This raises the bar as far as service provision is concerned. Many mortgage providers now give their clients the option to lock rates.
Locking allows a customer to make payments in the future, but at the current rates. In many cases, this happens when there is an offer with a reduced interest rate, but the client currently does not have enough money to make a down payment.
To gain from the offer, the client bargains for a lock. So that when he/she gets money in the future, he/she can still get a mortgage at the prevailing rate.
This is an option not many mortgage providers give. Therefore, as you compare and contrast interest rates, also look at whether a provider gives room for locking or not. Definitely, the one with a locking offer is the better option.
4. Annual Interest Rate
The base rate before adding other rates is very important. This is the primary determinant of how much a mortgage will cost you. A higher interest rate will set you back a huge amount during repayment. Therefore, the lower the interest rate; the less costs you incur.
5. Cash Reserves
Your savings, too, should guide you on which is the right amount of mortgage to take. Banks consider your cash reserves before approving any disbursement in the form of a mortgage. Think about the following question. How many months’ worth of payments do you have in cash?
The cash reserve criterion, in this case, is merely comparing the savings you have with the total amount to be repaid. With these two figures, take the amount to be repaid and divide by the savings you have. The number you get is the total number of months it would take you to complete repaying the house loan with your current savings alone.
The higher this number is, the higher the mortgage risk. Therefore, you should aim at having a lower cash reserve rate.
6. Age Matters
For homeowners age 62 and older you may find that a federally insured Reverse Mortgage offers a better interest rate than conventional loans. Since Reverse Mortgage is our federally insured and guaranteed by the US government risk to the bondholders are virtually none therefore offering favorable terms on both adjustable and fixed-rate options. To get an idea of what current reverse mortgage interest rates are running check out the free calculator at https://
Conclusion
Mortgage interest rates are huge determinants of the cost of the house loan you want to take. To be safe, you need to be wise during your comparison. Ensure you look at all the interest rates and try to settle for a lower rate. Also, always remember that as much as the interest rate is a significant variable, other factors like cash reserve and down payment are also critical.
