When preparing to buy a home, it’s always a good idea for prospective buyers to research interest rate trends and projections; after all, even a seemingly slight fluctuation in interest rates can have a significant impact on how much you’ll pay over the life of your home loan. For instance, while a 3.5% interest rate may not seem much lower than a 4% rate, the fact remains that the former could save you thousands of dollars or more over the life of your loan.
By understanding current interest rate trends in addition to the different interest options available to you in a mortgage, you can ultimately make the smartest decision based on your unique needs and financial situation.
30- and 15-Year Fixed Mortgages
Fixed mortgages are among the most common options and refer to a mortgage with an interest rate that is guaranteed to stay the same throughout the life of the loan (assuming the borrower doesn’t refinance). While a 30-year fixed mortgage is standard, you may want to consider going with a 15-year term if you can afford to make a larger monthly mortgage payment. Doing so will allow you to pay off your house sooner while also securing a lower interest rate.
Adjustable Rate Mortgages
With an adjustable rate mortgage (ARM), you’ll typically start out with a low interest rate for a specified period of time. From there, your interest rate will be re-evaluated and adjusted on a pre-determined basis. For example, a 3/1 ARM will have the same interest rate for the first three years, followed by an adjustment every year after that. This type of mortgage tends to be best suited for those who plan on selling a home within the initial fixed interest period.
Finally, there’s also the option of taking out an interest-only mortgage. With such an option, you pay just the interest on the loan for a predetermined amount of time (usually between seven and ten years). From there, many choose to refinance to save money after the interest-only period of the loan ends. This option tends to be ideal for those who are just starting out and plan on having a higher income by the time the interest-only period of their loan is up.
The Importance of Researching Interest Rates
Regardless of the specific type of mortgage that’s right for you, taking the time to research current interest rates before applying for a loan is a must. If you need help assessing your current options, contact The Parker Group today. Their team of real estate experts are available to discuss your housing needs and keep you informed of important market changes in Greenville, SC.