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Factors That May Affect Home Mortgage Interest Rates

By
Real Estate Agent with Keller Williams Realty

Many home buyers and homeowners do not always understand how interest rates are affected.  Normally, a lower interest rate will provide a buyer more money, therefore, giving them the capability to purchase more home.  Interest rates are always fluctuating; therefore, buyer should have a discussion with his lender when to lock-in their interest rate.  Lenders are required to disclose the Annual Percentage Rate (APR) of the loan to their clients.  The APR reflects the yearly interest rate and it is normally greater that the interest rate.  The APR includes the cost of points, mortgage insurance, and any fees included in the loan.  After you have secured a loan, interest rates normally will either decrease or increase.  As a homeowner, if the interest rates are decreasing, when is the proper time to refinance my current loan?  Before refinancing you should give consideration to the following:  should be planning on living in the in the home for another 18 months,  new interest rate is approximately 2% less than your current interest rate, do not refinance back to the same number of years as your original loan, unless your goal is only cash flow improvement.  Recommend keeping either the same number years left on current loan, or reducing the number of years in new refinance loan.  Reduction in years and interest rate will provide you the greatest savings on your home mortgage.  Finally, how do discount points affect your interest rate?  When negotiating the interest rate for your loan, you are allowed to buy down your interest rate.  Buying down interest rate is referred to as discount points.  One discount point is the same thing as 1% of interest.  Buying down interest rate can be smart if you stay in the home long enough to realize a savings.  Remember, discount points are tax deductible for the buyer.          

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