Mortgage Interest Rates
While mortgage interest rates generally vary little from
lender to lender, those shopping for loans should be very
aware of the process that lenders use to establish their rates.
They should also be aware of the various types of loans, along
with their varying rate structures, in order to understand
their options. Simply put, those seeking mortgages should
be proactive in seeking information and asking questions of
lenders that will help them to make a wise selection.
Mortgage loan interest rates can change daily along with
the financial markets. When the market is particularly volatile,
the rates may change several times during one day. Hence,
the interest and push of many buyers to “lock in”
a rate when the market appears to be lower or if speculation
is that the rates are about to rise.
Each morning bank loan officers and mortgage brokers are
on the lookout for the daily rate sheets that they receive
from their company leadership. The rate sheets, which are
not disclosed to the public, tell loan officers their “cost
of money,” the amount that they must pay in order to
borrow money that day according to specific terms and lengths
of time. Lower interest rates cost more points; higher interest
rates cost fewer. Points are equal to one percent of the loan
amount. This is because lenders make more money over the life
of a higher rate loan.
Also, additional items listed on the rate sheet are the number
of points associated with each loan rate. This is the amount
of money that the institution wishes to make on the loans.
Different loan rates “cost” different amounts.
Banks and brokerage houses establish their own internal policies
for setting fees reflecting the minimum amount that they wish
to make on a loan (the points) Bank loan officers and mortgage
brokers are paid on commission and are, thus, given considerable
flexibility in the range of what they can quote in terms of
loan costs. The more understanding the consumer has of this
process, the more successful the transaction will be from
all aspects. |
