Mortgage Rate Comparison & Refinance Rates for New & Existing Home Owners
The interest rate on your home loan has a direct impact on how much you will pay per month and how much you will pay overall for your home. Therefore, it is critical that you spend time comparing loan rates before you choose a lender or a type of loan to finance your home.
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You Know You Got the Best Rate
You won’t know if you got the best rate unless you take the time to see what a variety of lenders are offering. For instance, your local credit union may offer a better rate on a 30-year mortgage, but a larger bank may offer a better rate on an FHA loan that you ultimately use to pay for the house.
In recent years, the Internet has made it easier to get loans from national lenders that may not have been available to you in the past. These lenders may offer better rates than any local bank or credit union or at least put pressure on them to match those rates.
If you decide to use a mortgage broker instead of a specific lender, the broker should search all available loan products to find you the best rate. This process should only take a few minutes and truly help you explore all of your options.
Many Factors Determine Your Interest Rate
No two lenders are going to look at your application the same. This means that your local lender may consider you to be a higher risk than the national bank down the street. Smaller banks may not have the resources to recover if you default on your loan, which means that they may charge higher interest.
They may also not offer government loans that offer lower interest rates regardless of your down payment. It is also possible that one lender sees your 700 credit score to be more than adequate while another won’t give you the best rate unless you have a 740 credit score.
Fixed or Variable Rate?
One variable that you may not consider when it comes to determining how much interest you will pay is whether you have a variable or fixed rate loan. While a fixed-rate loan may come with a higher interest rate, it won’t change for the life of the loan.
Variable rates mean that the interest you pay could increase depending on the health of the market. Despite the lower introductory rate, you may pay more interest over the life of the loan.
For many first-time buyers, they will be required to accept a variable rate loan unless they have perfect credit and stellar debt ratios. However, there may be lenders who are willing to offer a loan with a fixed rate if you are willing to pay mortgage insurance or willing to put down a larger down payment.
How Much Do You Have to Put Down?
As your interest rate is tied to risk, some lenders tie your interest rate to your down payment. In other words, the more you put down, the less interest you will have to pay. As a first-time buyer, you probably want to keep as much of your money as possible as you adjust to your new housing payment and other expenses related to your new home.
Some lenders may require that you put down at least 20 percent to get top rates on a conforming or traditional mortgage. Your down payment for a non-conforming loan without mortgage insurance could be as high as 10 percent while you may be required to pay as much as 5 percent to qualify for an FHA loan.
However, a lender that is willing to work with you may accept as little as 15 percent down for a traditional mortgage and 10 percent or less for other types of loans. Depending on your credit and other variables, you could get an FHA loan with a down payment of 3 percent or less out of pocket while keeping the same interest rate.
On a $100,000 home, you keep $1,000 for each percent you shave off the required down payment. That’s in addition to the hundreds or thousands of dollars in interest that you save over the life of your loan for each point you shave off of the interest rate.
As with any other loan, it is critical that you shop around to get the best possible rate. Remember, the rate that a bank or lender quotes today may not be the same rate quoted next week or next month. Therefore, you should remember to keep any lender offering the product you want on your watchlist just in case their rate becomes more competitive. When you do find a rate that you like, take advantage of your lender’s rate lock, which will ensure that you have the same rate for up to 45 days or longer.
Comparing Refinancing Mortgage Rates
In today’s housing market, it is more important than ever to be vigilant about interest rates. The Federal Reserve is on the edge of a new campaign to increase interest rates, but the timing and nature of the increases, as well as how they will affect mortgage rates, is unclear. Moreover, the housing market is still in flux eight years after the 2008 financial crisis. In this post, we’ll talk about how important it is to compare mortgage rates regularly and how it can help you time a refinance.
Your mortgage rate has a huge impact on how much you pay over the course of the loan. A difference of just one percent could mean tens of thousands of dollars depending on how early in the mortgage the change happens. However, if you have a fixed-rate mortgage and you want to take advantage of a lower rate, you will need to refinance, and that often entails large fees.
That means you need to be very careful about the exact rate you will gain after the refinancing and understand the savings that will come with it. Not every lower rate will wind up saving you money, because the refinancing fees might outweigh the savings. It comes down to the size of the fees, how much balance is left on the mortgage, the term of the mortgage, and the difference between the old and new interest rate. The lower the fees, the lower the new rate, and the younger the mortgage is, the more sense refinancing makes.
It is not, however, easy to predict where interest rates will move. Mortgage rates depend on the Federal Reserve’s interest rate. Historically, this rate is at an unusually low level right now. The Fed is keeping the rate low because that brings down interest rates on many loans all across the economy, stimulating borrowing and economic activity. Soon, the Fed will try to raise its interest rate closer to a normal level again. The central bank wants the economy to thrive on its own without needing help from an artificially low interest rate.
The Fed does not want to raise rates too early, though, so it has to be careful about the timing. If it does raise rates too soon, then it will hurt the economy. So the Fed waits to see how the economy is performing, how the labor market is doing, and so on. Whenever the economy looks like it is improving, the Fed will raise rates.
But it is difficult to predict when exactly that will happen. Mortgage rates are likely to increase once the Federal Reserve has raised its interest rate enough, but again, the relationship is not exact: a rise in the Federal funds rate does not lead directly to a rise in mortgage rates.
All of this adds up to say that it is very hard to tell when mortgage rates change, but it is likely that over the next year, they will slowly increase. However, individual banks may still occasionally drop their rates in order to attract new business. That means you should definitely try to check mortgage rates frequently to see if there are any good deals available. Find a good mortgage calculator and periodically compare how much you will pay with your current rate and how much you would pay under a hypothetical new rate.
If you know what your bank would charge for the process, then you will be able to estimate what kind of mortgage rate you would need to see for the refinancing to be worth it. Simply find out the total cost of the mortgage with your current rate and then the cost with the new rate. If the difference between those is more than the refinancing is worth.
That is why it is a good idea to compare mortgage rates frequently: the savings can be huge. The benefit of a fixed-rate mortgage is the security of knowing the rate will stay the same, but you won’t be able to take advantage of a new, lower rate that comes along. Unless, that is, you refinance. It might not happen now, but about twice a year you should make a habit of seeing what the prevailing mortgage rates are.
You might just spot a deal that saves you some money. When it comes to mortgages, the large size and long duration of the loan means that even a small shift in the interest rate can make a large difference. Don’t be surprised if you don’t see anything that makes the change worthwhile, because it is true that the Fed is planning to raise rates. But that might not be the case three or five years from now. Don’t miss out on a good chance to save yourself thousands.