What are Current Mortgage Rates?
With the state of the economy and the housing market in early 2012 the current mortgage rates are still operating near an all time low. Lenders are offering loans at low interest rates in order to encourage people to buy, and though each loan varies based on individual factors, it is still a good time to buy and take advantage of the low interest rates.
How Interest Rates Work
Your yearly total gets broken down into your monthly payments, then as you continue to make payments; your interest rate is applied to it on a monthly basis. As you pay off the loan the interest rate that is applied to your monthly payment gets smaller, even though for a fixed rate mortgage the bill will still be the same. After ten years time, you are paying less in interest and more towards the actual principal of the loan.
Applied to Loan Types
Current mortgage rates are different for the different types of loans. An adjustable rate mortgage or ARM will vary throughout the term to match the most current interest rates. This can help you to get the lowest interest possible, or it can cause your interest rate to go up with the current interest rates. This type of loan is good for people that work off of commission, or have a varied monthly income. A fixed rate loan stays the same throughout the entire term. Whereas this keeps your rate from fluctuating, you may not always be getting the best interest rate from month to month.
Banks and lenders use an amortization schedule to determine that the monthly bill on fixed rate mortgage loans stays the same, while still figuring in the most current interest rate and deducting it from the bill accordingly. If the interest rate is higher one month, then a larger portion of the same mortgage payment will go to interest while the rest still goes to the principal. If the interest rate drops, the amortization schedule will reflect that as well, and more of your payment will go to the principal.
If you decide to make additional payments towards your mortgage, or pay above the regular monthly amount, then you will need to make sure that you make the payment towards the principal only, or else the additional money may only go to cover interest rates.
As of the today, the interest rates for most types of loans are lower than 4%. However, this number still varies from loan type, credit score, and the lender you choose to go through. It is a good idea whenever you take out a mortgage loan to ask the lender for a copy of their current mortgage rates, and whether they are weekly or daily rates. You can also check this information online. Many lenders are reporting that the interest rates can be expected to remain low for the duration of 2012, but it really comes down to the economy, and the current market on a day to day basis.
By Rachel West