Interest rates affect everything from our credit cards to student loans and even the cars we drive. They also play a big role in determining the price of your home if you plan to borrow money for your mortgage.
How do interest rates affect my home loan? The McGuinn Hybrid Homes team answered a few common questions below that will help explain how mortgage interest rates work and how to save money when you buy your next home.
How do interest rates work?
Interest rates determine how much you will pay back later on a loan you take out now. The U.S. Federal Reserve sets the rate at which it will lend money to banks and other financial institutions and then they determine a rate to charge individual borrowers. This is why there may be some variation in the mortgage interest rates you see when you research loans.
Home loans are traditionally offered in 15 or 30-year increments. Once you determine the amount of money you need to borrow, you can use a mortgage calculator to predict the total price you will pay by the end of the term.
Why should I buy when they are low?
Low interest rates ultimately make your home more affordable by saving money over the life of the loan. It could also mean that you increase your total budget if a lower interest rate is available allowing you to stretch your dollars and purchase a slightly nicer home than originally planned. When interest rates are low, it also means that mortgage loans are easier to find because the institutions are borrowing at a lower rate too.
Where are mortgage rates now?
Mortgage rates started dropping dramatically last spring and reached the lowest rates in recent history with a 2.68 last December. That was more than a point below the year before and nearly two points lower than December 2019.
Freddie Mac reported an average of 3.08 this March which is trending upward, but it is still far below the numbers we have seen in recent years making this a great time to buy if you are considering it. Experts are predicting these numbers to continue rising as the economy recovers.
McGuinn’s mortgage expert
McGuinn Hybrid Homes makes it easy for you by working with a team of mortgage experts that can help you find loan options that fit your specific situation and goals. Since they live and breathe financing, they will handle the research for you to ensure you have the best rates and fees available. When you are ready to start shopping for a new home, Contact Us.