There is no easy way to understand mortgage rates today. First they go up and then they go down and most people do not understand what it all means. These days it seems that you have to be a mathematical genius to keep up with it. If you are in the market for purchasing a home or looking to refinance the loan you currently have on your home, it can be very confusing understanding what it all means.
Of course the main factor in determining what the mortgage rates will be for your loan is the amount of your home loan and the terms of that loan. This is also determined by the amount of the down payment that you have for the sale. Usually it is recommended that you have at least a twenty percent down payment for your home. But the larger the down payment amount, the better it will be for you.
The four primary factors that decide your mortgage rate are the amount of principal, the interest, the taxes and the insurance. These are all factors in the calculations for a loan payment.
When you make your payment, a portion of that goes to pay the principal amount of the loan, a portion for the interest, taxes and insurance.
There are a lot of different mortgage types. You may hear terms like fixed rate, or 30 year fixed rate or 20 year fixed rate. If you plan on living in the home for a long time, a fixed rate mortgage is what you should apply for. With a fixed rate plan, the monthly payments will pretty much remain the same. As the loan is paid down, less will go toward interest and insurance and more will go toward the principal.
There are also adjustable rate mortgages. With this type of loan, the interest rates are adjusted as the market rates change. This means that your monthly payments can change from month to month. Although it usually has a lower interest rate, it means also that the rate can increase by a lot without any warning which means your monthly payment may end up being a lot more than you can afford.
Another type of loan is a balloon type loan. This is typically more attractive to people who do not plan to spend a long time at the residence. They can be anywhere from 5 to 10 years. Although the monthly payments are more stable like a fixed rate mortgage, you will have a large lump sum payment at the end. At that time, if you decide to stay at the residence it may be possible to refinance the mortgage.
If you are in the market for a home, it is very important that you talk to your financial institution about the type of loans that are available for you. It is important that you are confident that your financial situation will cover the type of mortgage that you are granted. Most financial agencies will model home loans based on several types of factors and allow you to see the numbers and what type of loan will be the best for you.