Let’s start with the basics. What is a mortgage interest rate? In simple terms, the mortgage interest rate is the cost to borrow money from a lender. Borrowers pay their interest monthly along with the agreed upon principal loan payment. You will pay this total amount monthly for the entire term of your loan. Typical mortgage terms range from 10-30 years.
Mortgage rates come in two options, fixed rate or adjustable rate (ARM). A fixed rate mortgage means that the rate you lock in will never change for the life of your loan while an adjustable rate means that the rate can fluctuate. Usually your ARM mortgage has a set rate for a certain number of years (between 1-10) and then the rate will change periodically.
The current low mortgage rates have a key driving factor – you guessed it, the economy. Mortgage rates are often the result of job reports, the Consumer Price Index, consumer confidence and more. Mortgage rates often go down when the economy isn’t doing well and they go up when the economy is doing better. This is often unpredictable which is why taking advantage of the low rates is important because they don’t last forever.
Although the economy is a key driver of the rate environment, it’s not the only one. Your credit score, work history, savings and debt-to income ratio are all factors as well. If you are thinking about buying a home, it’s important to get your credit history in check. Pay down what you can and make your payments on time.
Low mortgage rates will save you money. So not only is it a great time to buy, but it’s a great time to refinance. You could potentially save hundreds of dollars per year by refinancing your current loan to a lower rate.
Sikorsky Credit Union is happy to help. Our Home Loan Consultants will listen to your needs and pair you with the right loan for you. Together, we can look at the numbers and decide what works best for you. Learn more: https://sikorskycu.org/Borrow/Loans/Mortgages
Are you hearing a lot of chatter lately about low mortgage rates? It may leave you wondering what that actually means. Why are they low? Does it help you save money? We are going to break all of it down for you…