Types of Home Loans

Home loans are most general called mortgages. So, before we go any farther you need to understand more about mortgages rates.

Why do you pay mortgage rates on home loans?
Mortgage rates are a fee that is charged for using the lending company’s money for a specific time period.

How do you know what the mortgage rates will be for you home loan?
Mortgage rates are figured by dividing the amount of interest by the amount of money borrowed for your home loan. An example would be: If the lending company charges $60 per year for you to borrow $1,000, the mortgage rate would be 6%. You will find mortgage rates posted at most lending companies.

What types of things determine what mortgage rates will be for any type of home loan?
Inflation is a big factor on how mortgage rates are decided. When inflation rises, your mortgage rates will also increase. Lending companies lose money that they are expecting to be paid back to them when inflation goes up, so they compensate by raising mortgage rates. How many people are looking for credit can also be a factor in why interest rates increase. How much every other lending company is paying is also why interest rates can be higher or lower.

Are mortgage rates different for different types of home loans?
Yes, the higher the credit risks of the loan, the higher the mortgage rate. Loans that are determined to be high risks are ones that the lending company believes will probably not be repaid.

By checking with different lending companies you will find that home loan mortgage rates are not the same for each company. As an example: The interest/mortgage rate for a 30 year fixed mortgage in:
San Diego, California varies from 5.386% to 6.27%
Bloomington, Indiana varies from 5.391% to 6.071%
The interest/mortgage rate for a 10 year fixed mortgage in:
Daytona Beach, Florida varies from 4.557% to 6.105%
Memphis, Tennessee varies from 4.557% to 5.026%

So mortgage rates can be a big factor when you are looking for a home loan. This may not be a big difference but when you are talking about several thousand dollars, it does become an important deciding factor. Mortgage rates on home loans vary from state to state and from lending companies to lending companies. They can also very according to the length of the loan and the amount of money borrowed.

What is a refinance home loan?
To refinance your home loan is just getting a loan on what you have left to pay on your home. The interest can then be calculated on the new interest rates with only what you have left to pay.

Interest rates are low now, so now would be a good time to get a refinance home loan. What you will do is; that the remaining amount you own on your home is the amount that you want to get the loan approved for. If your loan matures in 5 years you can stretch the remainder of the first loan amount out over 10 to even 30 years at a lower interest rate so your monthly payments would be lower.
A refinance loan is like starting over getting a home loan. All the fees that you had to pay when you got the first will have to paid again like closing costs.
When you begin to talk with a lending company about refinance home loans, they will want to discuss with you if you want to pay for points. They may call them points, discount points, loan discount, maximum loan charge, or loan origination fees. All these points really are, is interest that you will be paying up front on your refinance loan; similar to a down payment. You will just be paying some of interest at the beginning of loan instead of later.