Mortgage Loan Interest Rates |
By Louie Latour |
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If you are in the process of shopping for a mortgage you need to
understand interest rates and which type of mortgage is best for
you. Here are the basics of mortgage loan interest rates.
Mortgage interest rates come in two flavors: fixed interest rate
loans and adjustable rate loans. Fixed interest rates are just that;
your interest rate is fixed for the duration of the mortgage and
interest rate hikes will not affect your monthly payment amount.
Adjustable rate mortgages on the other hand come with variable
interest rates. Your mortgage lender will adjust your interest rate
and your monthly payment amount at regular intervals specified in
your loan contract. If interest rates go up the lender will raise
your adjustable interest rate and your monthly mortgage payment will
go up accordingly.
Both types of mortgage interest rates have
their advantages and disadvantages. Adjustable rate mortgages have
the advantage of lower interest rates and typically come with a much
lower introductory interest rate. You should note this introductory
rate is not the actual interest rate; at the end of the introductory
period the mortgage lender will adjust your interest rate to the
actual rate. The disadvantage of adjustable rate mortgage is their
vulnerability to interest rate hikes. When the Federal Reserve
raises interest rates homeowners can see their monthly payments
increase significantly; this is the risk inherent to adjustable rate
mortgages.
Fixed interest rate mortgages offer the safety of
knowing your interest rate will not go up at the hands of the
government. Fixed interest rate mortgages come with a slightly
higher interest rate than a comparable adjustable rate mortgage; you
will pay more for piece of mind. To learn more about mortgages and
how to avoid making common homeowner mistakes that will cost you
money, register for a free mortgage guidebook. |
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