Understanding Mortgage Interest Rate 

Understanding Mortgage Interest Rates in Grand Junction CO is simple. An interest rate is the price of money, and a home mortgage interest rate is the price of money loaned against the security of a specific home. The interest rate calculates the interest payment the borrower owes the lender.

The rates quoted by lenders are annual rates. On most home mortgages, the interest payment is calculated monthly. Hence, the rate is divided by 12 before calculating the payment.

Example: Consider a 3% rate on a $100,000 loan. In decimals, 3% is .03, and when divided by 12, it is .0025. Multiply .0025 times $100,000, and you get $250 as the monthly interest payment. 

Fixed Versus Adjustable Interest Rates

A mortgage on which the interest rate is set for the life of the loan is called a “fixed-rate mortgage” or FRM, while a mortgage on which the rate can change is an “adjustable rate mortgage” or ARM. ARMs always have a fixed rate period in the beginning, ranging from 6 months to 10 years. The rate adjustment feature of an ARM makes it a lot more complicated than an FRM, which is why many borrowers won’t consider an ARM.

Interest Rate and the APR

Whenever you see a mortgage interest rate, you will likely see an APR, which is almost always a little higher than the rate. The APR is the mortgage interest rate adjusted to include all the other loan charges cited in the paragraph above. The calculation assumes that the additional costs are spread evenly over the life of the mortgage, which imparts a downward bias to the APR on any loan that will be fully repaid before term – which is most of them.

How Do I Lower My Mortgage Interest Rates?

At Elite Group Mortgage, we work with our clients during the pre-approval process to get a close estimate of the interest rate. Once we have that number, we can recommend things you can do to work on your credit, buy down points or work with the seller’s real estate agent to negotiate seller commissions to help lower that projected rate. Getting pre-qualified is the first step to take. This shows the sellers that you are serious and have your financials in order, so they know they are not wasting their time. This is helpful for the negotiation stages of buying a home. Understanding Mortgage Rates In Grand Junction CO is easy with Elite Group Mortgage. Please feel free to contact us today for a free financial review. 



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