Buying a home can be an exhilarating experience, which comes with lots of apprehensions even with the best advice. Once you choose your loan program, you’re making a huge financial commitment that may drastically impact your life. One of the crucial aspects that affect your finances is mortgage interest rate since it determines your repayment amount.
How Mortgage Interest Rates Affect Your Payments
Let’s analyze how mortgage interest rates impact your payments.
Mortgage interest rates can be broadly classified into two categories: fixed and variable. In a fixed rate mortgage, the rate remains the same regardless of market fluctuations. Variable rates, on the other hand, fluctuate according to market conditions. Fixed rate mortgages protect borrowers from market uncertainties, however, the rate remains the same regardless of market fluctuations. Fixed rate mortgages protect borrowers from market uncertainties, however, the rate is typically higher than in variable mortgages. Variable rates may benefit the borrowers in the case of the market rate reducing. In certain cases, hybrid loan programs are available that offer features of both, with fixed rates for a certain period and variable rates after completion of the stipulated term.
Impact on your periodic payments.
- In case you want to apply for a higher loan amount, fixed rates may end up in higher monthly payments.
- Variable rates may help you qualify for a higher loan amount, though the borrower will be more subject to market risks.
However, hunting for a loan with the right parameters is no easy feat. It’s best to seek the help of a mortgage professional who can gauge what deems appropriate for your financial objective. If you’re a prospective borrower, Drew Mortgage Associates can be the right service provider who can guide you from start to finish this process. The experts at Drew Mortgage can help you predict market conditions and make an appropriate decision.