Mortgage Interest Rates by ps94506

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									Mortgage Interest Rates
                    Any time we borrow money, we pay
                    an interest rate – or a percentage
                    fee – for the convenience. Those
                    who lend money for a living make
                    their profits by charging interest,
                    and those who borrow money
                    constantly strive to pay a smaller
                    percentage of interest. The most
                    significant borrowing occurs in the
                    real estate business, because the
                    items bought and sold – namely
                    pieces of property – are relatively
                    expensive. For most of us, buying a
                    home is the biggest expense of our
                    entire lifetime, and the mortgage
                    interest we pay over the life of a
                    loan can cost as much as the house
                    itself.
                                             MORTGAGE RATES
                                                   TABLE OF CONTENTS




CHAPTER. I...................................................................................................................................1
 MORTGAGE INTEREST RATES ..........................................................................................1
CHAPTER. II .................................................................................................................................2
 UNDERSTANDING MORTGAGE INTEREST RATES ......................................................2
CHAPTER. III................................................................................................................................3
 HOW TO REDUCE YOUR MORTGAGE INTEREST RATES..........................................3
CHAPTER. IV................................................................................................................................5
 HOW DO INTEREST RATES WORK? .................................................................................5
CHAPTER. V .................................................................................................................................7
 5 TIPS FOR GETTING LOWER INTEREST RATES .........................................................7




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                             MORTGAGE RATES

                                      Chapter. I

                              Mortgage Interest Rates



There are many ways to pay for real estate, and as the mortgage business becomes more
sophisticated over time, so do the ways that loans are packaged, marketed, and creatively
used to help us finance our dreams of home ownership.

But regardless of how complex mortgages and loans become, one thing remains constant
and will continue to drive the financial sector, and that is mortgage interest rates.

Any time we borrow money, we pay an interest rate – or a percentage fee – for the
convenience. Those who lend money for a living make their profits by charging interest,
and those who borrow money constantly strive to pay a smaller percentage of interest.
The most significant borrowing occurs in the real estate business, because the items
bought and sold – namely pieces of property – are relatively expensive. For most of us,
buying a home is the biggest expense of our entire lifetime, and the mortgage interest we
pay over the life of a loan can cost as much as the house itself.

For instance, if you borrow $100,000 at ten percent interest, your interest payments will
be about $10,000 per year, on average. And if you have a typical 30-year mortgage, the
interest to service that loan can accumulate over the decades and add up to somewhere in
the neighborhood of $300,000, or three times the actual cost of the house itself. So it pays
to get the best deal possible when applying for a mortgage, because even a fraction of a
percentage point can mean a difference of thousands of dollars over time.

Nowadays we hear lots of conversation about rising mortgage interest rates. As gas prices
and other staples become more expensive, inflation threatens to put a damper on the
economy. Our budgets get pinched, our dollars get stretched to the max, and interest rates
on things like mortgages and credit card debt rise, sometimes catching us off guard and
unprepared to deal with the higher monthly payments.

One defense against this kind of interest rate inflation is to borrow now at what are still
historically low rates, with fixed rate mortgages. That way you can lock in attractive rates
for the long haul, before it’s too late.

Lenders, just like consumers, feel the effects of a slowing economy and rising mortgage
interest rates. Just as we have to pay more to borrow money, so do banks and mortgage
companies. As rates begin to rise, mortgage companies become more concerned about
making new loans to generate new business. This can be good news for borrowers, who
might be able to take advantage of special offers and promotional discounts




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                              MORTGAGE RATES

                                       Chapter. II

                     Understanding Mortgage Interest Rates


Even before you go hunting for the best mortgage deal for your dream house, you need to
have a clear understanding of mortgage interest rates. Mortgage interest rate is one of the
biggest factors (though not the only factor) in deciding what mortgage deal is best for
you. Also, mortgage interest rate is one of the most important things that you use to
measure how good a mortgage lender is. So let’s get started with gaining some basic
understanding of mortgage interest rates.

The mortgage lenders keep floating new mortgage plans all the time. However, all these
plans are based on just 2 types of mortgage interest rates i.e. fixed mortgage interest rate
and adjustable mortgage interest rate. While the fixed mortgage interest rate is fixed for
the entire term of the loan, the adjustable mortgage interest rate adjusts itself after short
intervals of time and is based on a pre-determined financial index (like treasury security).

The adjustable mortgage interest rate could adjust itself on monthly, annually, 3-yearly,
5-yearly or as agreed with the mortgage lender. So the mortgage interest rate remains
fixed till the next cycle of mortgage interest rate adjustment when it adjusts to the
prevailing mortgage interest rate which is based on the financial index. Moreover, you
might have a cap (a limitation) on the amount/percentage by which the monthly-payment/
mortgage-rate can adjust at each adjustment cycle.

Further, the mortgage interest rates are different for different loan durations e.g. the fixed
mortgage interest rate for a 15 year loan is lesser than the fixed mortgage interest rate for
30 year loan tenure. Besides that there are mortgage plans that offer you the option of
changing from adjustable mortgage interest rate to a fixed mortgage interest rate. Such
mortgage plans become very handy when you are on an adjustable mortgage interest rate
that is expected to rise in the near future.

Moreover, such an option can save you the hassle of going for a refinancing option.
Another factor affecting the mortgage interest rate is the points i.e. the percentage of total
mortgage amount that you pay upfront towards interest. One point is equal to 1% of the
total loan amount. Paying points entitles you to a lower mortgage interest rate (for the
mortgage lender, it’s like an instant return on their investment).

Generally, mortgage lenders float various combinations of points and mortgage interest
rates for various offers. The points system is more effective in high interest regime since
in low interest regime the rates are already so low that incentive to further lower the
interest rates is not so attractive.

So, those were some basic facts about mortgage interest rates which everyone should be
aware of

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                             MORTGAGE RATES

                                      Chapter. III

                How To Reduce Your Mortgage Interest Rates



When it comes to buying a home, your mortgage matters just as much as the cost of your
home. Interest might seem like a small percent, but when compounded over thirty years,
it can literally double the amount you actually pay. If you want to lower your payments
and pay less for your house, you should consider the many ways you can lower your
interest payments by refinancing.

Taking advantage of a changing housing market is one of the easiest ways to lower your
interest payments on your mortgage. If you have a fixed interest rate and interest rates are
dropping, you can refinance to an adjustable rate or a lower fixed rate mortgage. If rates
are rising, you can do the opposite and change from an adjustable rate to a fixed rate; this
can keep your interest rates from skyrocketing.

You may be able to lower your interest rate by taking advantage of an improved credit
history. If your credit rating was low when you first acquired your loan, you may have a
high interest rate. If you’ve been paying your bills on time, your credit may have
improved, in which case you might qualify for a lower rate. There are many credit repair
companies that can help you improve your credit. Beware of credit consolidation
companies, which actually can further damage your credit!

If you have two loans, a first lien and a second lien on your home, you may want to
consider consolidating those two liens into one. Many people get equity lines on their
homes, but don’t realize that the equity line is adjustable, and often has quite a bit higher
interest rate than the first loan. Refinancing the two loans into one can often save money.
Another strategy would be to pay down the equity line as soon as possible.

10-year and 15-year fixed mortgages usually have lower interest rates because the loan is
getting paid twice as fast as a 30-year mortgage. The down-side is that the payments will
be quite a bit higher.

No matter why you decide to refinance, always be sure to speak with several lenders first,
or find out who your friends and colleagues use. Good referrals are the best way to find a
mortgage professional you can trust. Sometimes brokers may give you a quote that is not
what you eventually get. Be sure to ask for a good faith estimate and ask to see proof that
your loan is locked at the rate you are quoted to ensure it is the rate you actually get.




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                             MORTGAGE RATES
Beware of low start rate programs. They are usually not the actual interest rate, and may
be simply a teaser or a negative amortization program that defers your interest payment
until a later date. This can help lower payments, but not the actual interest rate or amount
you’ll owe in the end.

Remember, before you take advantage of any refinancing offer, find out if it will actually
save you money. On-line mortgage calculators help determine how much you’ll pay
using your new and old interest rates. Then you can just deduct the points and fees
(unless they’re included in the new mortgage) and find out how much you’ll actually be
saving.




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                              MORTGAGE RATES

                                      Chapter. IV

                           How Do Interest Rates Work?


One of the most confusing things about borrowing money is calculating the interest rates.
Interest rates vary and when you go to take out a loan or a mortgage it might seem
intimidating when the loan officer starts talking about interest rates per annum, nominal
rates and market interest rates.

There are different types of interest rates depending on whether you are borrowing
money or investing money.

When you are borrowing money you have to pay interest back at a set rate. These rates
are determined by several factors. One of these factors is risk. If you have a bad credit
rating the rates at which you pay interest on loans may be significantly higher than
someone who has a pristine credit rating.

The reason for this is that the lender sees you as a risk. When you are a risk, the rates
applied to your lending rise. This can make it especially difficult for someone with a bad
credit rating to purchase anything major including a home or a vehicle. They may be able
to afford the initial payments, but once the interest rates are added, the amount exceeds
their budget.

Another factor that determines interest rates is the length of the loan. Lower interest rates
are often offered if the consumer extends the period of the loan. To the consumer this
may seem like a windfall. They view the smaller interest rates as a savings to them. Short
term it is but since the loan is being extended to take advantage of the lower interest rates,
they are actually paying out more money in interest over the length of the loan.

Interest rates do not only affect just the consumer but they have an impact on the
economy as a whole as well. When interest rates climb, people are less likely to purchase
goods that aren’t essential to their lives. Car sales drop and home sales often plummet as
well. The average consumer doesn’t want to spend the extra money on the increased
interest because the rise in rate just means less money in their pocket. The cost of the
goods they are purchasing hasn’t changed, it’s the cost of purchasing those goods that
has.

On the other side of the interest rates spectrum is investing. People want to invest when
interest rates are high so as to yield the biggest profit. Years ago the traditional savings
account was often viewed as the traditional investment tool. The bank would post their
interest rates and people would save their money in the hopes that it would grow
substantially over the course of a number of years.



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                            MORTGAGE RATES
Today you are more apt to find people investing in many diversified things; money
market funds, the stock market and bonds. If you decide to invest in bonds they will have
a posted interest rate. The rates on bonds might be slightly higher than other investments
because with many bonds you have to lock your money in to the investment for a specific
amount of time. The period can be anywhere from several months to several years.

Interest rates impact our lives everyday whether we are aware of them or not. To keep on
top of both your borrowing and investment needs it’s a good idea to follow interest rates




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                              MORTGAGE RATES

                                       Chapter. V

                    5 Tips For Getting Lower Interest Rates


When it comes to receiving a lower interest rate for a credit card there are a few tips that
may help you receive a lower interest rate on your current credit card. Some of them may
seem to be a little to easy and there are some ways that are going to take some time and
research on your part.

One way to make sure that you are going to get a lower interest rate is to pay all of your
bills on time and always try to pay more than the minimum balance if possible. When this
is accomplished, you are not only going to be able to receive a lower interest rate for your
credit card but you are also working on your credit report as well.

You are going to want to try to pay all of your bills off on time or early because it will
help to raise your credit score so that you are able to receive a lower interest rate that you
have proven to deserve. Therefore, you are going to want to try to keep track of your
credit report and credit score so that you are going to have an idea to where you stand in
the eyes of creditors.

If you presently have a credit card with a company that you are happy with you can
always give the customer service a call and ask about receiving a lower interest rate
because you are satisfied with them and would like to say with their credit card.

If your present credit card is not able to offer you a lower interest rate, you may want to
think about looking around at another credit card company to see what they have to offer.
Many different credit card companies are going to offer you a low interest rate for a
certain amount of time when you transfer your credit card balance with them.

One thing to look at is what their interest rate is going to be after the introduction period
is up. If it the rate is going to be higher then what you are paying now you may want to
make sure that is would be a wise decision in transferring your balance with a different
company. You do not want to end up paying for your balance transfer because the interest
rate is lower for the introductory period but much higher than what you are paying now.




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