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What Are The Different Types Of Mortgage Rates?

January 4, 2021

Offering key to a new home buyer. Knowing the type of mortgage rate will serve the homebuyer best for the lifeOf all the decisions that are involved in buying a home, one of the most important ones is which type of mortgage rate will serve the homebuyer best for the life of their home loan. There are a few different types of mortgage rates that one can choose from.

What Is A Mortgage Rate?

Those who are in the market to buy a new home will quickly find that there are a wide variety of mortgages on offer. Two of the most common mortgage types are fixed rate mortgages and adjustable rate mortgages.

Fixed Mortgage Rate

A fixed rate mortgage uses the same interest rate across the life of the loan. This means that the borrower’s monthly mortgage payment will remain the same year after year.

Although the breakdown of principal and interest that is paid each month will vary, the total payment stays the same. In the early years of such a mortgage, the payments are primarily composed of interest.

A fixed mortgage is typically offered in terms of 15, 20 or 30 years. The 30-year fixed rate mortgage is one of the most common loans Americans use to purchase houses. It is a conservative option for long-term or cautious borrowers who want to be sure they will be able to make every payment on their loan.

Benefits Of A Fixed Rate

Mortgage rates conceptThe biggest benefit of a fixed rate mortgage is the fact that the monthly principal and interest payments do not change. This gives borrowers predictability so they can budget their expenses precisely each month. However, borrowers are always free to pay more than their minimum if they wish to pay the home off faster.

For a borrower who plans to stay in their home for at least 10 years, the stability that comes from a fixed rate mortgage makes it an attractive proposition. This type of loan is often the choice that offers borrowers the lowest monthly payment, but the trade-off for this low payment is a higher overall cost.

Cons Of A Fixed Rate

Borrowers generally end up paying more interest on longer-term fixed rate loans, and it will take longer to build equity in the home. Another drawback is that interest rates are often higher on fixed rate mortgages than they are on adjustable rate mortgages.

In addition, when interest rates are high, it may be more difficult to qualify for a loan because the payments will be less affordable.

Adjustable Mortgage Rates

An adjustable rate mortgage is a type of home loan that has fluctuating interest rates that rise or fall according to current market conditions.

Many adjustable rate mortgage products begin with a fixed interest rate during the first few years before changing over to a variable one for the rest of the term. The length of the fixed rate period can vary, running anywhere from one month to 10 years; those with shorter adjustment periods tend to offer lower initial interest rates.

Once the initial term has ended, the loan resets and a new interest rate is used that is based on current market rates. This rate will remain the same until the next reset, which might be the following year.

Some adjustable rate mortgages place a cap on how much the monthly mortgage rate or interest rate can rise to protect borrowers against significant fluctuations.

This type of loan is a good choice for borrowers who are comfortable taking on a certain level of risk. Those who do not plan to stay in their home for longer than a few years can see significant savings on interest payments by taking this route.

Benefits Of An Adjustable Rate

A couple showing the keys of their new house. There are a wide variety of mortgages on offerWith an adjustable rate mortgage, many homeowners enjoy a lower fixed rate during the first few years of the loan. In addition, they save a significant amount of money on their interest payments.

Moreover, their low initial payments often allow a borrower to qualify for a larger loan; during times of falling interest rates, borrowers can take advantage of lower rates – and, by extension, lower payments – without needing to refinance their mortgage.

Cons Of An Adjustable Rate

However, should the adjustable rate rise too much, borrowers could find their home becoming unaffordable and even end up defaulting on their loan. In addition, if the value of the home drops significantly within a few years, it can be more difficult to refinance or sell the home before the loan resets.

Talk With The Pros On Mortgage Rates

Choosing the right type of home loan for you involves assessing a variety of personal factors against the current economic environment. To find out more about which type of mortgage rate is best in your situation, talk with the pros on mortgage rates at My Lending Pal. Our team can review your options with you and help you make an informed decision about the best way to finance your new home.

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MyLendingPal, Inc, NMLS ID #1734346, (www.nmlsconsumeraccess.org); Corporate Office: 5400 Laurel Springs Parkway, Suite 304, Suwanee, GA 30024. Georgia Residential Mortgage Licensee #61544. Principal Loan Originator: Ricky Merchant, NMLS ID: 1517056. Georgia License # 54264. For questions regarding state licensing, please contact (404) 433-8918. Not all products and options are available in all states. Terms are subject to change without notice. Any rates or terms are speculative only and can change without notice.
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MyLendingPal, Inc
MyLendingPal, Inc
5.0
Balachandar Sundaresan
Balachandar Sundaresan
17:30 23 Jun 20
Roger Merchant and his team were very helpful, right from getting a great rate to completing all process on time and being super responsive. Would happily recommend him!!
Dinesh Nair
Dinesh Nair
14:41 30 Jan 20
I would definitely recommend MyLending Pal for all mortgage needs. It all started with a great competitive quote on refinance and excellent service continuing all the way until closing. Priti, Ricky and Roger were a pleasure to work with.
Ramesh Kumar
Ramesh Kumar
02:03 17 Dec 19
I would really recommend Nations First Home Mortgage, if you are looking for the best home mortgage options. I was very much glad to work with this team and they have saved lot of time and money!!
gulshan rai
gulshan rai
03:21 17 Apr 19
I would highly recommend Mr Roger to anyone in the area looking for an amazing lender. He made the mortgage process so easy and effortless. I could tell him and his team were very attentive to all the details that came with applying for a mortgage and were quick to remind me of any deadlines that were approaching.It was super easy to work with Mr Roger.My special thanks to preeti who did an amazing job to get things done in the timely manner. If I had any questions, it was almost like she was waiting at her desk for my phone call to answer the questions immediately. The loans closed on time and without a glitch. I would highly recommend them to anyone
Ajith Nair
Ajith Nair
01:50 13 May 19
We highly recommend Roger for financing mortgage. Roger and his team were excellent through out the process and we had a very smooth purchase. They were always available when we had any questions. It was an amazing experience working with Roger and his team.
Pratul Patwari
Pratul Patwari
13:03 20 Jul 20
Roger Merchant and Priti Vin helped us in buying our first home. They understood our needs and took care of everything for us. They were very good with the communication through the process. They will always be my first choice in future for the mortgage services.
Sujatha Hariharan
Sujatha Hariharan
20:51 26 Jul 20
They were able to find me great rates. Service was quick and communication prompt. The loan process can be daunting as is the document gathering process but this was the easiest and quickest that I have experienced. Highly recommend!
Dinesh Nair
Dinesh Nair
15:53 30 Jul 20
I would definitely recommend MyLending Pal for all mortgage needs. It all started with a great competitive quote on refinance and excellent service continuing all the way until closing. Priti, Ricky and Roger were a pleasure to work with.
Manu Pushpanath
Manu Pushpanath
15:59 29 Jul 20
Great lender to work with. Right from document collection till closing they did it in 2weeks. The fastest closing I heard and get to experience myself. One improvement I suggest is it will be good if the closing attorney can come into the house for completing the closing. Considering current situation it will add a lot of value to the reputation. Thanks Milan and team for a good closing experience.
Sakthi S
Sakthi S
20:46 01 Sep 20
Would definitely recommend Roger and his team.Refinanced for the second time and with roger, I didn’t feel like I refinanced.The process was very smooth and fast.The rates were very competitive and it was amazingworking with Roger and his team.I’d recommend him for sure.
Sunny Patel
Sunny Patel
21:17 01 Sep 20
They were quick, courteous, and professional. They got me an excellent rate and helped make the process smooth. I would recommend using to my friends and family!
Emmitt Rathore
Emmitt Rathore
14:57 22 Dec 20
Roger helped us find an unbeatable rate!His decades of work in the industry made it easy for us to complete many processes with the lender, and helped us close on time!I will definitely be passing the good word around and recommending family and friends to him.I look forward to our next real estate transaction with them.
M Alamoti
M Alamoti
01:02 11 Jan 21
I had the experience of using their service. They know what they are doing. They are very honest, professional and caring. I have no doubt and hesitation to recommend them to anyone who is looking to purchase a home. I am very pleased for their service.
kondal rao
kondal rao
05:36 09 Apr 21
Roger and Team were very helpful. Proactive and honest service. My closing ended in no time. I made the right choice of choosing this team. Worth trying with this Team
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