Home Mortgage Loan Rate

Finding the Best Home Mortgage Loan Rate

Obtaining the best home mortgage loan rate will save you thousands of dollars in interest paid over the life of your loan. Unfortunately, unless you’re versed in mortgages, it’s easy to be mislead by lenders.

Home Loan Mortgage Rate

How to avoid this? Take an example, if you got a 30-year mortgage for a principal of $150,000 with an effective interest rate of 5.5%, your payments would be $851.68. If you get a loan at 6%, your payments would be $899.33. That’s a difference of $47.65 per month.

That may not sound like a lot of money when you compare this to a $150,000 house, but over time it will add up. If you kept the house for just 5 years, you would be paying an extra $2859 in interest!

When you get a loan, besides the stated interest rate on the loan, you will also have to pay closing costs and perhaps even points. There is a better way to compare loans than just by their stated interest rate. Annual percentage rate, or APR is essentially calculated by taking into account all of the money you pay to acquire a certain loan. The points and even some of the closing costs are included in the APR calculation.

How do you find out the APR? Lenders have to give you this information by law, they have to advertise the APR of any loan they are advertising.

Fixed vs Adjustable Rate

If you are getting yourself a home mortgage loan, you have to choose between choosing a fixed rate or an adjustable type of mortgage. No one can really say that one loan is better than the other. It depends on your needs, conditions and many other various factors.

A fixed rate home mortgage loan or FRM, as its name itself suggest, involves loans whose interest rates remain the same all throughout the lifetime of the mortgage. They generally cost more to compensate for the lesser risk and the greater comfort involved. While an adjustable rate home mortgage loan or ARM is that whose rate fluctuates as the interest rates in the market rise and fall. ARMs are given initially cheaper than FRMs since they involve greater risk.

The downside of getting an adjustable home mortgage loan is that you can run a real risk of having to pay more if interest rates rise sharply. Because of its stability and lesser risk, FRMs are understandably more popular. Even if they come more expensive, getting a fixed rate home mortgage loan will enable you to easily manage your monthly budget.

To help you figure out which one is best, you can try to imagine your worst and best case scenarios. You can calculate and compare your options and determine which one can give you the best deal possible.

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