Mortgage - Home Mortgage

Mortgage Rate
Low Interest Home Mortgage

The home mortgage with the lowest interest rate available to most homeowners is an Adjustable Rate Mortgage or ARM. An ARM is a mortgage on which the lender can adjust the interest rate during the life of the mortgage.

The ARM often has lower interest rates because the mortgage lender has the ability to change the interest rate. The typical ARM is called a 5/1 because the mortgage contract gives the lender the ability to change the interest rate after five years or 60 months.

One drawback to an ARM is that a lender can raise the interest rate later on in the life of the mortgage. If interest rates go up considerably because of inflation, a homeowner with an ARM could be hit with interest rates two or three higher than what they were formerly paying.

Why Interest Rates Are Important

It is vital for a person to get the lowest interest rate possible on their mortgage because interest rates determine the size of the mortgage payment. A mortgage payment consists of a small percentage of the mortgage principal and an added amount of interest. The more interest charged, the higher the mortgage payment.

Getting a low interest mortgage can save a homeowner thousands of dollars on a mortgage. It can also make it more likely for a person to qualify for a mortgage.

The Best Low Interest MortgageĀ 

The best deal on a low interest mortgage for the average person is a traditional fixed rate mortgage with a low interest rate. In a fixed rate mortgage the interest rate is locked in for the life of the mortgage. If a mortgage lasts 30 years, the homeowner will pay the interest rate for 30 years.

This is why a homeowner needs to get the lowest interest rate they can when take out a mortgage. Interest rates go up and down with inflation, in the early 21st Century interest rates were quite low around 5%. In the past; however, mortgage interest rates have been much higher sometimes 10% or more.

A homeowner who gets a mortgage while interest rates are low can enjoy those interest rates for the duration of the mortgage. A homeowner with an ARM could see their interest rates double or triple.

Getting a Low Interest Rate

It is usually easier for a person with a good credit score to get a lower interest rate on their mortgage. Mortgage providers charge higher interest rates to people with bad credit because they take a higher risk by loaning money to such people. It maybe impossible for a person with a bad credit score to get a good interest rate on a mortgage.

This is why a person should try to improve their credit score before seeking a mortgage. Adding just a few points to a credit score can decrease the interest rate and mortgage payments. A person can improve their credit score by examining their credit report and having negative information removed from it.

A low interest rate on a home mortgage can save a family hundreds of dollars every year. Everybody should try to get the lowest rate possible on their home mortgage.Ā