Lowest Home Loan Rates
So, what does person need to know about home loans and how to find the lowest home loan rates? If he has spent any attention to the housing market, he knows it is not a good time to buy a home. The property values are low and the housing market, as with the rest of the economy, has shown slow signs of recovery. Economic policies are not the concern of the home buyer. He instead is more interested in interest rates and the term of the house loan.
If someone has ever turned on the television news, read a news paper, or come across information on the Internet, he knows that home interest rates are at historic lows. He may also know that his savings account rate is also at a historic low. This has been the case for some time. Some people worry that the low interest rates may not result in enough savings, but that is a different matter.
The prime mortgage rate is slightly under 4% right now. The lower the interest rate, the lower the amount of money a person will pay for his home. Because most mortgages last decades, getting the prime rate should be the goal of every home owner. Some home owners have even refinanced their current mortgage to take advantage of the lower rates. Lower rates, in general, also mean lower payments.
The second factor in most mortgages in the length of the loan. The longer a loan a person takes out on his home, the lower his payments will be, but it also means that he will pay more on the home over all. Someone who can afford to take out a 15-year mortgage will pay less overall. Mortgage calculators, which are available on many different financial website, can help someone figure out what his payments will be and what type of loan he should take out.
A borrower may also have heard the term sub-prime rate. The sub-prime rate affects people whose credit is less than perfect or who the bank deems cannot afford to pay the lower interest rates. The banks, like businesses everywhere, believe in taking risks. These risks determine whether they will make a profit or go bankrupt. The greater the risk a bank takes, the higher a person’s interest rate will be.
The cost of obtaining a loan can be hundreds or even thousands of dollars, depending on how much money a person wants to borrow. Thankfully, there are a number of things that a person can do to get the lowest interest rate possible. Following are some tips that can help a person save a significant amount of money on a car, home, student or other large loan.
Compare Interest Rates
When taking out a large loan, it is always a good idea to compare interest rates and see which lender is in fact offering the best deal. While the interest rate for any given loan does depend in large part on one’s credit score and down payment sum, loan rates do vary from lender to lender and a bit of “comparison shopping” can help a person save hundreds or even thousands of dollars.
Those who are looking for a mortgage or refinancing loan may want to work with a mortgage broker. A broker does not charge a fee for his or her services as the bank that ends up providing the loan pays the broker’s fee. A broker does the hard work of taking a person’s loan application to various banks and seeing which one will offer the best deal.
Short Term Loan vs. Long Term Loan
The loan duration will almost always have a bearing on how high or low the interest rate will be. The longer a person borrows money for, the more interest he or she will have to pay on the loan. Whenever possible, it is a good idea try to pay the loan off in a fairly short period of time.
Adjustable Rate vs. Fixed Rate
A fixed rate loan is always better than one with an adjustable rate. While interest rates are presently quite low, there is no guarantee that they will remain this way for the entire duration of the loan. With a fixed interest rate loan, a person is protected from changing interest rates and the danger of having to pay an unexpectedly high interest rate for any given month or even longer.
Putting Down a Deposit
When purchasing a pricey item such as a car, boat or home, it is always a good idea to save up money for a large loan deposit before attempting to take out a loan. Lenders like working with people who can put down 10% of the cost of the loan upfront and will give such individuals the lowest interest rate.
Working with a Guarantor
Those who have poor credit ratings will want to ask a trusted friend or relative to be a guarantor for the loan. Working with a guarantor enables a person to get a lower interest rate than would have otherwise been possible, as the guarantor’s good credit ratings help to offset the risk the lender takes in providing a loan.
Improve the Credit Score
One’s credit score determines in large part whether or not a lender will grant a loan if so, what the interest rate will be. Thankfully, there are many things that can be done to improve an existing credit score. Using credit on a regular basis and then paying bills on time automatically have a large positive impact on one’s credit ratings. However, there are some small and simple things that can be done to boost the credit score.
Credit reports can be obtained for free from all three of the large credit report companies. These reports should be checked for mistakes, as it is not uncommon for small errors to have a negative impact on the credit score.
Cancel credit cards that are not being used. In reality, most people only need two to four cards and having more cards than this reflects badly on a person’s credit score. Be sure to also check the information given for each card application and update old addresses and phone numbers.
Those who want the lowest interest rate on a loan should do everything possible to boost their credit score, save up money for a down payment and compare interest rates from varying lenders. Getting a guarantor’s help and choosing the shortest possible borrowing time period are other ways in which a person can get a low interest loan with favorable terms and conditions.