Keller Williams Realty Phoenix

Rise in the prices of homes – How 20 year mortgage rates have an effect on them?

Article contributed by Mr. Knight. 

Do you want to start the procedure of buying your home? If yes, then it is important that you spend sufficient time to investigate the different loan options available for the home buyers. You need to know that 20 year fixed rate mortgage loan is usually the most suitable loan that is offered by the lenders at present. This type of mortgage loan provides several benefits that the other mortgage programs do not offer. Refinance loans and home purchase loans are available for 20 year term period. Both of these loans are offered at a high competitive rate.

20 Year mortgage – How this loan works

When any home buyer gets the approval for a 20 year mortgage loan, he decides to lock the rate of interest. The borrower is given the assurance that the rate will remain the same throughout the 20 year amortization period.

There is a misapprehension that the payment will remain the same in case of a fixed rate loan. Although the rate of interest will not increase, the property tax and home owner’s insurance amount may change. Some borrowers use escrow account along with their mortgage loans and as such, may see changes in the mortgage payments throughout the loan term period as these amounts may rise and fall.

20 Year mortgage – Compare these loans with the other ones

You should keep in mind that the short your amortization period is, the less your fixed rate of interest will be. A 20 year loan will usually have less rate of interest than a traditional 30 year mortgage loan. This is the reason why these loans have become so very popular. The longer the lender has the responsibility of a loan, the more amount of risk he’ll have to face. Some lenders may charge more rate of interest on long amortization loans since this is a way for them to manage the risk by generating more profit.

Though the home buyers may save money by choosing a 5, 10 or 15 year loan, the loan payments may become beyond their capability at any time. The lenders also offer reduced interest rates, however this is not a possible borrowing solution for the home buyers in most of the situations.

Check the interest rate – Know the suitable time for applying a 20 year mortgage

The mortgage loan market is such that the rate of interest keeps on changing on a daily basis. As such, in order to know the suitable time for applying, check the interest rates and see when you can avail the lowest rate possible. A 20 year mortgage loan provides you the suitable option of obtaining either a fixed rate or a variable rate loan. Now, if you want to take out a variable rate loan, you should try to anticipate how the rate of interest will be throughout the loan repayment period. In case you aren’t sure if you will be able to afford an increase in your initial payment, then it is suggested that you do not go for variable rate mortgage.

Thus, if you are planning to live in your home for many years, then a 20 year mortgage loan may seem to be a good option for you. Make sure you ask your lender about the clauses of the loan that they are offering you. This way, you will be able to take out the right kind of loan according to your requirement.

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