Getting the best mortgage rate when you are purchasing or refinancing your house can be quite difficult, but not impossible. Crunching numbers and reviewing credit reports are definitely not the best ways to spend your free time. But somehow this needs to be done in order for you to be well-informed about the amount of money you will be giving to your lenders. You definitely need to know where your money is going when you make the monthly payments to your creditors or lenders. There are ways for you to identify which mortgage rates are the best options for your financial situation and capabilities.

Fixed-rate mortgage is the most common option for home purchases. The interest rate stays the same all throughout the pay back period. Fixed-rate mortgage rate is determined by the mortgage provider as advertised in their program. It is not tied to an index so even if the current interest rate is lower or higher, fixed-rate mortgages are not affected. You should also bear in mind that the mortgage rates for this particular type of mortgage are typically higher in starting rate compared to adjustable rate mortgages. But since the fixed-rate mortgage is not affected by current index changes, you are guaranteed a non-fluctuating interest that in the long run will probably save you a lot of money.

If you opt for adjustable rate mortgages (ARM), it is best that you shop around for the best mortgage providers available for you to be able to compare mortgage rates. You also need to be aware of the risks involved in adjustable rate mortgages. One of the most important points you should understand is that you will not be paying a fixed amount of money every month or year to your lender. Unlike a fixed-rate mortgage where the interest rate remains stagnant, adjustable rate mortgage interest rates fluctuate in relation to indices and margins.

And then there is the Annual Percentage Rate (APR). This will also affect the total amount of interest you have to pay. For the first few months or years of your loan period, your initial rate and payment might be lower than that of fixed-rate mortgages. So you should get your lender to clarify to you on the APR that they are charging you. If the APR is higher, you are more likely to fork up bigger amounts every month to make your payments even when the general interest rate stays stagnant. Get your lenders to disclose every single upfront fee and make sure there are no hidden charges.

The interest rate for adjustable rate mortgages change according to indices and margins. Some lenders use their own cost of funds as an index instead of the standardized version. Margins are a constant percentage that lending companies determine based on your credit score. If you have excellent credit rating, the margin will be set lower so you will not end up paying higher interest. The combination of the company’s index and margin will be the basis of your interest rate. The index may change to be lesser or greater but the margin remains the same.

It is advisable that if you decide to go for adjustable rate mortgages, you ask your lenders about the adjustment period. Lenders and banks are not allowed to whimsically raise or reduce their interest rate at their own will. Depending on the program you enrolled for, whether it is a 1-year or a 3-year ARM, the changes in the interest rate will only happen when it is due. For example, if you took the 3-year ARM your interest rate will change only every three years. So do your research, and find out the maximum change that can happen at each adjustment point all throughout your pay back period. This is so that you can plan your future payments.

Compare loan mortgage rates of different loan providers so you can make the best choice. If you prefer, you could always ask them to email you the details of the programs and deals that they offer instead of having them call you. After all, having lenders consistently call you to promote their deals can be quite bothersome and very annoying. So be assertive and let them know what you are looking for and request that they provide full disclosure on every fee and charges. It is your right as a customer to know where your money is going.

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