Residential mortgage interest rates can have a big effect on your long-term financial health. If you make the wrong choices when buying residential property, you could be paying thousands of dollars in higher payments and amortization charges over the life of your loan. One of the biggest mistakes made by new homebuyers is picking bad interest rates, to begin with. Here are some things to look for as you shop around for the best mortgage deal for you.
What Affects Interest Rates
When it comes to residential mortgage interest rates, several factors are considered inflationary. These include; higher wages, lower costs of living, rising market values of property and personal possessions, and increases in the debt to income ratio of an area’s population. A property purchased today will generally appreciate in the future, however, this is not guaranteed. So while it might be good today, it may not be so attractive in a few years down the road.
The first thing to consider when shopping for the best residential mortgage interest rates is what type of property you plan on investing in. Are you looking to purchase a single-family home, duplex, townhouse, apartment building, strip mall, or an industrial site? Do the prices in your area stay consistently higher year after year? Or are you buying a more expensive piece of property that appreciates slower? These are important questions that will help you better understand what type of residential mortgage interest rates you should be looking at. They will also be a big factor in determining the length of the residential property term.
It’s also important to understand that residential property prices change with time. It’s only natural for the first mortgage interest rates you get in the new year to be higher than the rates you were getting the year before. This is due to all the variables associated with any real estate transaction, such as supply and demand, inflation, taxes, etc.
Comparing Interest Rates
One of the things you should check out when comparing residential mortgage interest rates is the statistics released by your Reserve Bank. You can always find information about your Reserve Bank’s interest rates online at their website. Once there, look for a tab marked “Reserve Bank Interest Rates.” This will take you to a page where you can see information regarding various factors that affect interest rates. By examining this statistics release calendar, you can determine which factors affect your particular area the most.
For example, reserve bank statistics show that the unemployment rate is one of the main reasons that interest rates for residential mortgages are higher in certain areas than others. If you have a job, you have the opportunity to secure a low-interest rate on your residential mortgage. Likewise, if you are buying a property, it’s always a good idea to make your down payment. As a result, you will get a lower interest rate on your mortgage, which will save you money in the long run.
Another factor that affects residential mortgage interest rates is considered inflationary or non-inflationary factors. A few examples of considered inflationary factors are the federal funds rate, balance sheet, consumer price index (CPI), nominal GDP growth, and interest rates of the United States government. A few examples of non-inflationary factors include historical data on interest rates of the past few years and current inflationary or variable rates. The latter is usually considered negative for lenders since they tend to base future loan payments on previous rates and historical data.
It’s a good idea to remember that when you shop for residential mortgages, don’t just consider interest rates that you see advertised on advertisements and mortgage company websites. Instead, do some research into the actual costs of the loans that you’re considering. Look up the annual percentage rate (APR) you will be paying on the loan, as well as the closing cost components. Find out what your monthly payment will be, and compare it to other similar types of mortgage. Shop around and compare mortgage offers; make sure the residential mortgage interest rates you’re getting are right for you.