(PRWEB) August 6, 2004
We are a mortgage information dissemination company. In our day to day business we see a lot of misunderstandings related to mortgages. We hope that this article about mortgage interest rates along with the associated resources will help you in understanding it.
Mortgage is a necessity that every prospective home buyer has to come across, at least once within his/her tenure of life. This necessity of the home buyer comes along with plenty of interest rates, which vary according to the suitability of mortgage lenders. While shopping for a home loan, every buyer tries to find out the best mortgage deal with desirable interest rates. This needs a thorough mortgage analysis regarding interest rates, from numerous banks as well as mortgage lenders. Here is an article which will help you a great deal, in solving your queries regarding mortgage interest rates.
Mortgage interest rates are the interest rates charged up by lenders from borrowers, in a mortgage transaction. There is a choice of interest rates and the rates are very similar from one lender to the next, perhaps identical. The process of interest rate calculation is subjected upon the competitive mortgage market, which determines the initial interest rate of the loan Different rates have different costs. Higher rates don't cost as much as lower rates. This is because the lender is going to earn more interest over the life of the loan, so it makes sense to charge less. Alternatively, the lender charges more for a lower interest rate, because the lender will earn less interest over the long term.
While going up for the mortgage deal, a borrower should also know the various interest rate terms. Various terminologies related to mortgage interest rates are:
Initial Interest rate- This refers to the original, starting interest rate of a mortgage at the time of closing. This rate changes for an adjustable rate mortgage (ARM). It is also known as a teaser rate or start rate.
Prime Rate- Prime rate is the lowest interest rate that banks charge for short-term loans, to their best, prime or creditworthy commercial customers. Each bank quotes a prime-lending rate. (http://www.mortgagefit.com/prime-rate.html)
Face Interest Rate- Face interest rate is the percentage interest rate that is shown on the loan document.
Interest rate ceiling- It is the absolute maximum interest rate that a lender can charge for an adjustable rate mortgage (ARM), as specified in the mortgage loan agreement. This is regulated by the government.
Interest Rate Swap- Interest rate swap is a transaction between two parties in which each party agrees to exchange payments, tied to different interest rates for a specified period of time.
Interest Rate Buy-Down- Interest rate buy-down plan is an arrangement where the property seller, borrower or other party deposits money to an account. It can be released each month to reduce the borrowerÂs interest rate or monthly payments during the early years of a mortgage.
Fixed interest rate- Fixed interest rate is an interest rate, which is fixed and does not change during the term of the loan.(http://www.mortgagefit.com/fixed-rates.html)
Interest rate differential- Interest rate differential is a type of compensation, which is charged by the lender if the borrower pays off his mortgage principal prior to the maturity date. (http://www.mortgagefit.com/interest-rate.html)
Rate lock- Rate lock is a commitment by a lender to the borrower, promising a specified interest rate on a loan, provided the loan is closed within the specified period of time. (http://www.mortgagefit.com/rate-lock.html)
Because interest rates change very frequently, the longer a lender locks in a rate, the more risk that they have the market will move against them.
If you have any other queries related to mortgage, feel free to visit this site. http://www.mortgagefit.com