Mortgage Rates
Home mortgage rates represent part of the cost, or 'price', of mortgages, but it is important to note that a mortgage rate is just that - only one component of the price, to be added to all other costs in determining the total price of a mortgage.
It is also important from a borrower's point of view to make a distinction between quoted mortgage rates and actual mortgage rates. Why is this? Because the rates are almost never the same.
Quoted Mortgage Rates
The interest rates advertised or quoted by mortgage lenders are either the very best rates which they would offer to a prime borrower, or are below those rates (yes, it happens). They are also today's rates, which are not necessarily tomorrow's rates, as they are reviewed and reset every morning. Consequently the mortgage rates which you read in newspapers are already out of date, and you need to to look to other sources of information, such as direct contact or through the internet.
When you get to the stage of approaching prospective mortgage lenders for quotes, prepare your strategy for doing so before you make your first contact. Whatever that strategy is, whether you make the approach yourself or arrange someone else to do it for you (such as a mortgage broker), obtain all quotes on the same day so that you can compare apples with apples.
Actual Mortgage Rates
As we emphasized on the first page of this website under The Ideal Mortgage Resource, the price of a mortgage depends on you, the buyer. Therefore the only quoted mortgage rates which matter are the rates which mortgage lenders are prepared to offer to you. Those rates will take account of a host of factors, including your purpose in obtaining the mortgage, your individual circumstances, your credit score and other relevant criteria. That is why it is important to provide as much information as you are willing to disclose to any prospective lender.
In general, it is best that you lock in the mortgage rate and other terms at the point at which your bargaining power is greatest. This will almost always be furthest out from the prospective mortgage closing date. Lenders have a better idea of your bargaining power than you may realize, and they will be quite happy to let you get quite advanced in the loan application process before locking in a rate, ideally (for the lender) to the point of no return (for you).
Other Mortgage Costs
The other important components of the costs of home mortgages, to be added to mortgage rates, include:
- The margin;
- The points:
- The fees.
These components can have as much, and sometimes more, effect on the total price of a mortgage than mortgage rates alone. Always remember to obtain this information from every prospective mortgage lender and to factor them in to any decision which you make.
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