Mortgage rates can be a little bit mysterious. Newspapers and the media are telling us these rates are at historic lows. But what does that mean for you? Will they go up over time? Is your payment going to change?
Questions about how mortgage rates work are some of the most frequent questions we get from our clients. To help guide you, we went ahead and put together this little cheat sheet.
The loan type is the central feature determining whether your rate will increase at any point during the life of your loan. Fixed rate loans mean the annual percentage rate (APR) charged is locked in for the full loan term. The most common terms for fixed rate loans are 15 and 30 years, although there are some other variants out there in the market.
On the other hand, variable rate loans carry an interest rate pegged to the market rate. As it fluctuates (up or down), so does your interest payment and loan amount. These are often referred to as adjustable-rate mortgages (ARM), variable rate mortgages, or tracker mortgages.
Refinancing is taking out a new loan, with new terms, to pay off your existing loan. Many people refinance fixed mortgages to obtain a lower interest rate, or as a means to take cash out of the equity in their home. Other people use refinancing to switch from an ARM to fixed rate.
It depends. Contact the experts here at Midland Mortgage to find out the current mortgage rates and financing options best suited to your situation.