Best Interest Rate for Home Loans

When you buy a home, you make the purchase of a lifetime. And often, the loan you take out will nearly last your entire life through. Thirty-year mortgages are the most common type of house loan taken out. Qualifying for a loan, however, is just the first step. The most important thing you need to know is what mortgage interest rate to request.

This article will provide a brief breakdown of the best interest rates for your home loan.

Lower is Always Better

Stated by a credit repair Dallas expert, in the world of interest rates and loans, the lower your interest rate, the less you’ll pay over the long run. This principle works the same way for any loan you take out, including student loans. It’s always better to get a lower rate.

Major Loan Types

Depending on the loan you choose, your interest rate can stay the same or increase over the life of your loan.

Fixed-rate: This type of loan has an interest rate that stays the same from the day you acquire the loan until you pay it off.

Adjustable-rate: These loans usually come with a fixed-rate period, then will adjust according to market fluctuation. If the market drops, your payments will decrease. But if the market rises, so will your payments.

Duration of Loan

Loans typically come in 10, 20, 30, and 40-year increments. If you can get in on a low-interest loan, a fixed rate is the best way to go. But keep in mind, the longer you pay on your loan, the more interest you’ll be paying, as well.

The faster you can pay off a loan, the less interest you’ll pay. Let’s look at a practical example.

Let’s take a fixed-rate loan for $250,000. Here are the different amounts of interest you’ll pay at 4% interest.

Now let’s take the same fix-rate loan for $250,000 and set the interest at 3.5%. It may not sound like a lot, but you’ll see the difference quickly.

You can see from a quick comparison that the two factors affecting how much interest you’ll pay over the life of your loan are duration and interest rate.

Just by acquiring a lower interest rate on the same 10-year loan, you can save $7,077.88. On a 40-year loan, you’ll save a whopping $36,675.01.

The rule of thumb for any loan is the shorter duration and lower interest rate, the less interest you’ll end up paying.

Live by the Low-Interest, Short Loan Principle

To pay the least interest possible, the two principles to live by are, 1. Low-interest rate and 2. Short loan life. When you’re applying for a home loan, remember this principle and you’ll get the best deal around. Always go for the lowest interest rate offered. The shorter the life of your loan, the less interest you’ll pay. How has this changed the way you view home loans?