Best Home Loan Rates
Best Home Loan Rates
Mortgage rates are basically the rate of interest which is charged on a mortgage, and they can often be determined by the lenders' term deposit rates differential (such as Bank West Term Deposit Rates). They can either be fixed (which means that it will stay the same for the mortgage's period of time) or variable (which means that it can fluctuate).
Although both types have their own benefits, they also have their down sides, too which is why you always need to do as much research as you can to find the best home loan rates such as those at Uno Home Loans. The mortgage rate which is charged will determine the final cost of the mortgage, and also the amount of money which will be needed to be payed back each month, so it's important that borrowers try to find the best deal.
How a mortgage rate is determined by a lender
When it comes to determining a mortgage rate, the lender of the loan assumes the risks which may come with issueing the loan. This is because there is always the chance that a borrower may not keep up on their payments, which will then cause them difficulties.
There are quite a few things which go into determining a mortgage rate, and if the lender believes that there is a high risk, then you'll have a higher mortgage rate. And, the higher the risk, the higher the rate. One of the best ways to determine how much you can borrow is to use a home loans & mortgage repayments calculator.
This is because a high interest rate will ensure that the lender regains the initial loan amount at a quicker rate in the case that the borrower doesn't make pay them back.
Also, the borrower's credit score can affect the size of a mortgage rate. For a lender, the higher the credit score, the more chance that a borrower will repay the money, as a good credit score usually indicates that the borrower has a good financial history.
Mortgage rate indicators
In general, the biggest indicator for a high or low mortgage rate is the 10-year Treasury bond yield. This is because the mortgage rate will rise if the bond yield does and so this is a key indicator for monitoring home loan rates. But it also works the other way, and if the bond yield drops instead, then the mortgage rate will also drop.
The reason why it's called the 10-year Treasury bond yield when many mortgages are calculated based on 30 years is because, after 10 years, a lot of mortgages are either paid off or are instead refinanced for a new rate. So 10 years is a good way to judge the mortgage rate.
Also, the state of the economy can be a good indicator for it, too. Usually, if the economy isn't in a good state, then the bond yield will drop, and vice versa.
The next step once you have secured the right loan for you is to source the ideal property and one of the best ways to do this is to use the services of a buyers agent.
What Are Capped Rate Home Loans
There are many different kinds of home loans and many lenders only offer a select few, rather than all of them. Different lenders offer different types of home loans - and one of the most uncommon types are capped rate home loans.
They may not be as easy to find as some other home loans (such as repayment home loans, which you're likely to be offered by every lender you go to), but they can be very beneficial to those who use them. So, what are capped rate home loans? Here are the facts that could save you a lot of money.
Similar, but better - why capped home loan rates really perform
This kind of home loan is similar to another type of mortgage, but it's better for an important reason. The amount of interest that you pay monthly can change and your interest rate is based on the market's rates. When the market's rates change, so does your interest and the amount you pay.
If the market's rates drop you'll be paying less interest, but if the rates raise, you'll pay a higher interest. This is also how variable rate mortgages work, but there is something that makes capped rate home loans better than the variable rate ones.
What makes these home loans better?
So, you may be thinking that it's a bad idea to get a capped or variable rate mortgage, since the amount of money you pay on interest could increase. Well, that's the difference between capped and variable rate loans.
Capped rate loans have a cap on how high the interest rate can go, so your interest rate won't go any higher than a certain point - even if the market's rates double!
This makes them far better than variable rate home loans, as you'll always know what the highest amount of interest will be. You could get lucky and the rates may stay low, but you won't have to worry about the interest going too far, since you have a limit.
Why are these home loans so uncommon if they're so good?
As mentioned above, capped rate home loans aren't easy to find. The market's rates have been low for a while and although it's still better to be safe and know the highest repayments can go, the rates are simply not likely to rise that much. This means that (for the foreseeable future) it looks like a cap won't be needed - and since other loans have their own features and benefits, both borrowers and lenders see the potential for profit elsewhere.