When purchasing a home, most people need to secure a mortgage. With a mortgage payment there is usually an interest payment added to the principal borrowed.
In securing a mortgage, you should look at your options for interest payments. Mortgage loans are available as either fixed rate or adjustable rate loans.
The interest amount charged for a fixed rate loan will be fixed for the life of your mortgage. Adjustable Rate Mortgages tend to have lower fixed rates initially, however the interest rate can be adjusted after a specified period based on an index agreed upon in the loan.
Adjustable Rate Mortgages can look appealing in the beginning since you will have a lower initial interest rate. They start with a fixed period of 5, 7, or 10 years, and then the rate will be determined by market rates for the remainder of the loan term. However, these mortgages will be more of a gamble because you do not know what will happen with interest rates over the life of your mortgage loan.
Fixed Rate Mortgages use the national average interest rate to calculate the rate at which your loan is borrowed. Securing a Fixed Rate Loan is best for consumers who are buying a home with the desire to live in it for many years. These loans are typically amortized and due in 15 years or 30 years at your option. You lock in the current rate when the loan is secured and will have the option to refinance if interest rates go down from the original fixed rate. However, some loans may be subject to a prepayment penalty for early payoff of the existing loan.
When determining the interest rate on fixed term mortgages, banks first look at the amount of money you will need to borrow. Conforming Loans are loans of $417,000 or less. Non-Conforming Loans are broken down into two levels: Super Conforming or Jumbo Loans. Super Conforming Loans are loans for up to $625,000 and Jumbo Loans are those over $625,000.
Interest rates will be different for adjustable rate loans and fixed rate loans at conforming and non-conforming levels. The current market for Adjustable rates for conforming loans are 3.04 percent for the 5 year fixed period, 3.25 percent for 7 year fixed period and 3.625 percent for a 10 year fixed period.
Current Rates for Fixed Conforming Loans are 2.88-3.25 percent for 15-year loans and 3.75-3.95 percent for 30-year mortgages. Fixed Rates for Non-Conforming Loans are between 3.20-3.65 percent for 15-year loans and 3.95-4.25 percent for 30-year loans.
This week the Federal Reserve met and made the decision not to raise the current interest rates right now. They cite the weakness of the U.S. labor market and struggling economy as reasons the Central Bank should not raise interest rates.
The Federal Reserve acknowledges that the economy might not be ready for rate hikes until at least September. To raise rates, The Federal Reserve will look for evidence of further improvement in the labor market.
If you are looking to refinance your existing mortgage, now may be the time to lock in a lower rate on your fixed mortgage.
For a free courtesy consultation, or information regarding mortgage brokers, contact Bess Hochman, a top Westside Real Estate Broker for more than 20 years. Bess is also distinguished by holding a law degree. This article expresses the opinion of the author. You are advised to consult attorneys and others experts specializing in the issues referenced in this article.
Contact Bess at 310.291.4111 or email Bess.CenturyCityNews@yahoo.com.
“Bess is a master negotiator!” says Michael Donaldson, attorney and author of “Negotiating For Dummies.”
