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Home Loans Rates - What Are The Variables That Affect The Rate
Type of loan The type of loan that you select has a significant impact on the home loan rate. A variable rate loan may start out at a low rate and quickly escalate to a much higher rate. In fact, this is one of the major reasons why homeowners find themselves in trouble when they purchase a home with monthly payments that are at the limit of their personal affordability and then the payments increase because the interest rates increase. A fixed interest rate may cost slightly more than a variable loan to begin with, but you know what the rate will be in two years.
Economy The economy of the nation has an impact on the home loan rate, particularly if the loan as a variable rate loan. Often the home loans ratesis tied to the prime interest rate plus a certain number of points. Of course, when the economy is slowing down, loans are somewhat harder to get and the qualifying process may be more stringent. When the economy is booming and loans are easy, more people can qualify to get a mortgage loan because the restrictions are less onerous. People are more willing to take a chance on a larger loan when they feel positive about the state of the economy.
Loan Term Theoretically a loan can be for any length of time, and this factor is one that many potential borrowers don't think about. They just assume the best home loan rate will be at a 30 year mortgage term. Even conventional loans can be taken for 15 years, 20 years or 25 years. Shorter term loans cost much less in interest over the term of the loan, so even at a higher monthly payment and the same interest rate, the shorter term loan is a better deal, with significantly less money paid in interest.
Balloon payment • Another common way to structure a mortgage loan that will affect the home loan rate is whether or not there is a balloon payment attached to the payment of the loan. Often a mortgage will be structured to run for two or three years with a very low interest rate at the end of which there is a balloon payment that is the balance of the loan. At the end of the initial period, often the rate will increase, or the monthly payment will jump. Sometimes the entire loan is refinanced at that point. • Learning about the variables that impact loan rate figures is simple when you access the great resource web site found at Home Loan Rate or Home Loan. Check out the tips, links and cautions available here. Source: http://EzineArticles.com/1162223
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