Mortgage Calculators and Interest Rates

Interest rates are often the most significant part of any mortgage decision.  Unfortunately for many borrowers, finding the best deal isn’t as simple as looking for the lowest posted rate.  A loan with a lower rate but higher closing costs may end up being more expensive. An adjustable rate mortgage with a low start rate but onerous rate change terms may not be best alternative among adjustable rate mortgages.  Mortgage calculators can help discover the best deal by evaluating the interest rate, the closing costs, the term and other features such as the adjustment periods on adjustable rate mortgages. 

Mortgages are nothing more than loans secured by real estate.  The interest rate is the price of lending or borrowing money.  The interest rate on the loan is used to calculate the interest payment the borrower owes the lender for the amount borrowed.  Costs to obtain the loan impact the annual percentage rate but not the payment.  The best way to understand the overall cost of a mortgage is to look at its annual percentage rate (APR), which takes into account the interest rate and the loan’s other costs.  Mortgage calculators that evaluate closing costs and APR’s can be great starting point for considering mortgage offers. 

Mortgage rates are revised every day, sometimes rates change during the day as well.  When a borrower is estimating the current mortgage rate or the rate for qualifying, the rate that will apply is the rate on the day you lock the terms of the loan.  Mortgage calculators are only as good as the data that is input in them.  Users must be careful to use current mortgage rates, rates that correspond to the type of loan being reviewed and rates that are applicable for the size of the loan.  The amount of the loan can increase the interest rate if the amount financed exceeds the conforming loan limits established by Fannie Mae and Freddie Mac.

Prospective borrowers should make sure they get a competitive quote on the product they decide on.  It is also important to make sure the potential borrower looks for multiple sources for rate quotes.  If a borrower takes the first rate they are offered, without doing any research to compare it with other rates, there is always risk that this rate is not a competitive figure. 

A common trouble for borrowers trying to in compare competing quotes is evaluating the trade-off between points and interest rates.  Mortgage calculators that weigh the impact of closing costs and APRs can be an extraordinary resource for comparative loan analysis.

Shorter term mortgages can save thousands of dollars in interest charges over the life of a loan.  Often the interest rate on shorter term loans is slightly lower than that of longer term loans, compounding the savings.  Adjustable rate mortgages generally have lower start rates than fixed rate mortgages.  Large down payments can reduce the size of a loan and reduce the total interest charges on the loan.  Loans with low down payments may also have higher interest rates than those with larger down payments. 

All of these factors can be assessed by using a variety of mortgage calculators.  Mortgage calculators can evaluate the impact of short term and long term loans.  Mortgage payment calculators can weigh the impact of changes on down payment.  Adjustable rate mortgage calculators can be invaluable at comparing the various features of adjustable rate mortgages.  A well-informed borrower uses the mortgage calculators after determining the best interest rates and loan products available in the marketplace to determine the optimal loan program to meet their needs.

This entry was posted on Thursday, December 11th, 2008 at 3:56 pm and is filed under Mortgage Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.