Buying and refinancing a home can be one of the most difficult decisions you make. You want to make the right choice on a lender and a mortgage rate so that you don’t end up making a financially-harmful decision. Listed below are some of the most common questions about mortgage rates and choosing the best rate for your needs.faq
What is an APR?
“APR” stands for annual percentage rate. This is the term used to describe the year’s interest rate rather than the monthly interest rate that is applied on a mortgage loan. There are two types of APR: nominal and effective. The nominal APR is basically the simple interest rate for a year while the effective APR is the fee in addition to the compounded interest rate. The compounded interest rate is calculated across the year. Compound interest is interest that earns interest. To arrive at the nominal APR, add the rate and the payment period, and then multiply this by the number of payments you would make in one year.
When should I lock a mortgage rate?
First it is important to understand what a mortgage lock is and how it works. A “lock in,” as it is often called, is when a mortgage lender promises to keep an interest rate at a certain amount. It can be wise for both new home buyers or those who are refinancing to use a lock rate so they are not subject to the ebb and flow while the loan is processing.
What does it mean to “float down” a rate?
Simply put, this is like being given a second chance to lock your mortgage rate in the event that the rate falls. If you lock in at one mortgage rate, but then you decide that you want to float down and lock to a lower rate, then you may face additional fees.
What is the difference between a fixed and variable interest rate?
Like it sounds, a fixed interest rate will stay the same throughout the duration of the loan while a variable interest rate. This can also be called a “floating” or “adjustable” interest rate. Variable rates are typically less expensive than fixed rate loans.
Find the best mortgage interest rate today!
This is not a comprehensive list of questions and answers, so be sure to research and investigate thoroughly before you lock into a mortgage interest rate. This is why Best Mortgage Rates, Inc. can be so helpful. Our online system allows you to shop and compare thousands of rates from hundreds of home lenders throughout the country- and all of this is at your fingertips. Get started today!