Fixed Home Loan Rates
You’re getting ready to buy a home, and are wondering about fixed home loan rates, compared to their variable-rate cousins. And actually, you may not be quite sure what a fixed-rate mortgage entails in the first place! Now to worry, you’re about to learn about fixed-rate mortgages and where to find good loan rates.
What is a Fixed Home Loan?
You’ve heard the term before, but before you apply for this type of financing, you’d best know what is being discussed. So here you go, a quick overview of home loan financing.
A fixed loan is one where the interest rate is locked in for the life of the loan. So, for example, if you negotiated a rate of 5%, that interest rate will stay at 5%. It doesn’t matter if interest rates fall further or rise above, your loan interest rate will not change.
There is one thing to be aware of, however; a fixed home loan rate does not mean that your mortgage payment won’t fluctuate from year to year. That fluctuation you may see has to do with the cost of homeowner’s insurance and property taxes, not with your home interest rate.
What is a Variable Loan?
No discussion about fixed home loan rates would be complete, however, without a quick discussion of variable-rate loans, which are also called adjustable-rate mortgages. Variable-rate loans are those whose interest rate fluctuates over time, and these fluctuations are based on the Federal Reserve rate. Typically, an adjustable loan offers a very low initial interest, which then rises and falls depending on what the “Fed” does with rates.
If you should ever decide to go this route, be very sure there is a reasonable cap rate (where the interest cannot rise more than the cap rate each year). With the last housing bubble, many people got caught out with variable interest rates that went through the roof, and they lost their homes. And it’s partly because of this that fixed home loan rates are gaining in popularity.
Finding Fixed Home Loan Rates
Congratulations on choosing a fixed-rate home mortgage! Now that you’ve found a home and decided on a mortgage type, it’s time to go loan shopping. And it’s actually not as daunting as it might initially seem.
The first place to check for fixed home loan rates is online, and a good idea is to find a site that offers competitive rate quotes. In other words, you fill out one form and several companies (generally 4 or 5) will contact you regarding a quote.
With those fixed home loan rates quotes in hand, you can also go around to any local banks or lending organizations and see if they can offer fixed home loan rates that are any better. And obviously, make your first stop your own personal bank. They may offer a better rate since you are already a customer.
See, it’s not so difficult!