Current Mortgage Rates

Written by Beth Hrusch
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Knowing the current interest rates will help the borrower to make an informed decision when shopping for the best home mortgage. However, the numbers do not always tell the whole story. The way interest is calculated is an important factor, as well as the APY, or Annual Percentage Yield. Options for locking in a rate during the transaction can assure the borrower that the stated rate is the rate he or she will receive.

Mortgage Rates--What You Need to Know

Borrowers are often unaware that there are two different methods commonly used to calculate interest. The 30/360 is the standard method. It assumes that every month has 30 days and every year has 360 days. With the Actual/360 method, the borrower pays interest on the actual days in each month. This effectively means that interest is paid on five or six more days each year. This will affect how quickly the mortgage is paid down.

Borrowers can also take advantage of a rate lock program that allows them to get a desirable interest rate for their loan before it changes. For a small commitment fee, the rate will be locked for a certain length of time (the ERL period), and then changed to the current rate. The question of adjustable versus fixed rates is another issue that should be discussed with a mortgage specialist. Borrowers will want to know which option is best for them.

Interest rates determine the monthly payment on any kind of loan, and knowing the facts about how they are calculated will give the borrower an advantage when seeking a loan. Lenders often use interest rates to compete with each other for business. Thus, it is important to know that a lower stated rate does not always mean that the borrower will pay less interest over time. Smart borrowers who do their homework will generally end up with a better deal.


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