Rising Rates Got You Nervous?
It's pretty amazing that a rate increase of just 2% can impact affordability by as much as $40,000. Rates have been artificially low for some time, but we've been seeing rates on the rise. Every smart consumer knows to ask the question "how can I get the lowest interest rate possible?". Unfortunately, lowest isn't always the best. This week, we're sharing with you some details on what you need to know about the real cost of owning a home and factors that may impact your interest rate.
Lowest Isn't Always Best
The lowest rate certainly sounds best. But did you know the lowest rate doesn't always mean the lowest cost? Mortgage interest is just one component of the real cost of owning a home. Interest rates are a reflection of expectations for inflation and the supply/demand equation for money. Rising rates typically mean rising inflation, too.
When inflation occurs, the value of your home will typically rise. You can subtract that increase in value from the interest you pay for a better gauge of the real cost of owning. The opposite is true, too. If rates are low and inflation is absent, values stagnate or even drop, potentially adding to your real cost. In simple terms, a low rate and no appreciation can be more costly than a higher rate with appreciation. Recently, the markets have provided for both low rates AND rising prices.
Nervous About Rising Rates?
That's understandable, but remember that rising rates are usually a reflection of an improving economy. A growing economy means greater expectations for inflation and typically translates into rising home values. While no one wants to pay more interest, knowing your home's increase in value is greater than the cost of a higher rate can be very comforting. If you focus on the real cost of owning rather than just the interest rate, your peace of mind (and your pencils) will be left in far better shape.
Factors That Impact Interest Rates
Securing the lowest possible rate has less to do with scouring ads and more to do with the particulars of your transaction. Lenders typically pick the best scenario as the basis for advertisements. Unfortunately, best-case doesn't apply to every loan.
Here are some factors that impact the interest rate for a specific loan:
Securing a good interest rate requires balancing the different factors for your particular scenario. Fortunately, we excel at balancing acts. Let’s work together to discover what viable options are available for you! If you have any questions about current interest rates or mortgage rate locks at the Lake of the Ozarks, feel free to contact us! MHQ Mortgage HeadQuarters are your mortgage professionals at the Lake of the Ozarks and would be happy to assist you in financing your dream home at the Lake!
Mortgage Headquarters of Missouri, Inc
4824 Osage Beach Parkway, Suite 1
Osage Beach, MO 65065
Office: (573) 302-9990
Toll Free: (888)799-1206
Fax: (636)648-9917
Email: info@mhqmortgage.com
NMLS # 1229111
Lowest Isn't Always Best
The lowest rate certainly sounds best. But did you know the lowest rate doesn't always mean the lowest cost? Mortgage interest is just one component of the real cost of owning a home. Interest rates are a reflection of expectations for inflation and the supply/demand equation for money. Rising rates typically mean rising inflation, too.
When inflation occurs, the value of your home will typically rise. You can subtract that increase in value from the interest you pay for a better gauge of the real cost of owning. The opposite is true, too. If rates are low and inflation is absent, values stagnate or even drop, potentially adding to your real cost. In simple terms, a low rate and no appreciation can be more costly than a higher rate with appreciation. Recently, the markets have provided for both low rates AND rising prices.
Nervous About Rising Rates?
That's understandable, but remember that rising rates are usually a reflection of an improving economy. A growing economy means greater expectations for inflation and typically translates into rising home values. While no one wants to pay more interest, knowing your home's increase in value is greater than the cost of a higher rate can be very comforting. If you focus on the real cost of owning rather than just the interest rate, your peace of mind (and your pencils) will be left in far better shape.
Factors That Impact Interest Rates
Securing the lowest possible rate has less to do with scouring ads and more to do with the particulars of your transaction. Lenders typically pick the best scenario as the basis for advertisements. Unfortunately, best-case doesn't apply to every loan.
Here are some factors that impact the interest rate for a specific loan:
- Loan Level Price Adjustments (LLPAs) - Offered rates are based on LLPAs or risk factors. A high loan to value ratio (LTV) or low credit score, for example, carries higher risk and, therefore, a higher price.
- Loan Type - An adjustable rate mortgage (ARM) can provide a lower starting rate vs. a fixed rate loan.
- Loan Terms – Shorter terms equal lower rates as equity builds more quickly, reducing the lender's risk.
- Combined Factors – The combination of certain factors work together to impact final pricing. For instance, as credit scores improve, the rate differential for LTV changes are less pronounced.
Securing a good interest rate requires balancing the different factors for your particular scenario. Fortunately, we excel at balancing acts. Let’s work together to discover what viable options are available for you! If you have any questions about current interest rates or mortgage rate locks at the Lake of the Ozarks, feel free to contact us! MHQ Mortgage HeadQuarters are your mortgage professionals at the Lake of the Ozarks and would be happy to assist you in financing your dream home at the Lake!
4824 Osage Beach Parkway, Suite 1
Osage Beach, MO 65065
Office: (573) 302-9990
Toll Free: (888)799-1206
Fax: (636)648-9917
Email: info@mhqmortgage.com
NMLS # 1229111
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