Whether you’re looking to take out a mortgage or are just trying to figure out the best interest rate for your personal finances, there are many factors to consider. One of these is whether or not your loan is secured by property.
Mortgage Rates: What Do I Need to Know?
With the housing market continuing to recover, plan ahead and make sure you know exactly how much money you’re going to need for your next home purchase. If you plan on buying a house or refinancing with a variable rate loan, you should be aware of the current mortgage rates. Our article can help you get an idea of what to expect from these loans in 2018.
It’s important to understand what mortgage rates are before you start looking for a good loan. Mortgage rates are the interest rate that you, as a borrower, pay on your home loan. Rates vary depending on your credit score and other factors. For example, mortgage rates can be affected by inflation or economic conditions in the country where you live.
Grading Loans: How the Scorecard Works
Before giving you a loan, your mortgage company must have information about your finances and debt. This is why they may ask for your credit score before lending you money.
All lenders use a scorecard to evaluate your prospects for repayment. They use information about your income, debts, and credit history in order to establish your loan’s risk factor. There are three factors that lenders will look at when grading loans:
Secured Versus Unsecured Loans
The difference between secured loans and unsecured loans is how the loan is collateralized. A secured loan is typically backed by tangible or intangible assets, such as a car or a house, that the lender can repossess in case of default. In contrast, an unsecured loan does not go through foreclosure if the borrower defaults on the loan payments. Secured loans tend to be easier to qualify for because they often come with lower interest rates. However, there are risk factors associated with this type of financing.
Secured loans are loans with a collateral, like your home or another asset you own. The loan is backed by the value of the asset you are securing it with. Unsecured loans are backed by your personal credit or a co-signer with good credit. Secured loans require less paperwork, but they typically have higher interest rates than unsecured loans.
How to Get a Competitive Mortgage Rate
If you’re looking for a better mortgage rate, the first thing you should do is call your existing bank or institution to see if they are participating in the competition. If not, check out a few of the comparison websites such as Bankrate.com, Nerdwallet.com, and LendingTree.com to see what type of mortgage rates they offer. After that, research other options and compare them with your preferred lender’s pricing before making a decision.
Get in touch with your local lender to determine the rate you can expect to receive. Money pundits recommend contacting at least three different providers. Also, know that a higher interest rate doesn’t necessarily mean a better mortgage rate.
Conclusion
If you’re thinking about refinancing your mortgage, now is an excellent time to do so. Interest rates are low, and many lenders have reduced the qualifications for the loans they offer. So consider reducing how much you owe and eliminating debt by taking out a new loan for a lower rate.
The best mortgage rates are not always the highest rates. In order to get you a better rate, go for a lender that has lower fees and higher interest rates.