Understanding Mortgage Rates

Understanding mortgage rates                                                                                                             


Once you have the home buying plan in place, you’ll need to spend some time in understanding mortgage rates, discount points and annual percentage rate (APR), among other things. Mortgage interest rates may vary widely depending on a number of factors and your choices can help you get the lowest rate possible.


  •  Choosing between a fixed or adjustable rate is an important decision that you’ll need to make when you select a mortgage.
  •  Paying discount points upfront can help lower your interest rate over time.
  •  Using the APR can help you compare costs between two or more lenders.
  •   Shorter terms tend to produce lower interest rates.


Loans for low-income homebuyers


Depending on your personal situation, there may be a number of additional ways to lower your interest rate. If your state or local government considers you to be a low-income homebuyer, you may be eligible for special low-rate loan programs. A Chase Loan Officer can assist you with finding the right loan for your situation.


Fixed vs. adjustable rate


A fixed rate mortgage offers a fixed interest rate for the life of the mortgage and your monthly payments remain the same. An adjustable rate mortgage (ARM) offers a rate that is tied to a market index. Here’s what you can expect with an adjustable rate mortgage:


  •  You generally start out with an interest rate lower than a fixed rate loan. This saves you money early on and may help you qualify for a more expensive home.
  •   However, your payments can go up considerably when interest rates are rising.
  •   As the index goes up or down, your payments will also change at each scheduled adjustment date.
  •  There are “rate caps” to limit the amount your interest rate can go up or down.


 Which is right for you?


An important question to ask is “How long do I plan to own this house?”


  • Planning to stay put. If you plan to be in your home for more than seven years, you may want to consider a fixed rate mortgage. A fixed rate mortgage will offer you predictable payments and long-term protection against rising mortgage interest rates.


  • Planning to sell. If you plan to be in your home for seven years or less, an adjustable rate mortgage could be an attractive option. Keep in mind that should you stay in your home longer than you originally planned, your monthly payments may go up when your interest rate is adjusted if mortgage interest rates are rising.


Keeping an eye on interest rates


Depending on current interest rate conditions, the differences in the monthly payment between a fixed rate loan and an adjustable rate loan could be very small or quite large. Because of the many different variables involved, using an online calculator to determine which type of loan may be right for you can be a smart approach. In addition, your JM GROUP Loan Officer can help you consider all of your options.

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