Did you know that over 30 factors go into selecting a mortgage interest rate? In this post, we look at five things you can improve – and two factors you can’t control at all.
When you’re considering a mortgage, your first thought is probably “Can I afford it?”. A mortgage lender asks themself a similar question: “Will this person be able to repay the loan?” To the lender, giving you a mortgage is a risk, no matter how great your credit history is or how much money you make. To offset some of the risk, lenders charge interest on the mortgage.
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A mortgage interest rate is usually calculated as a percentage of your loan amount. It’s added to the amount borrowed; most of your monthly payments go toward the principal, but some go to the interest rate. This rate can be fixed (i.e. the same for the entire loan period) or it can be variable (i.e. the rate rises or lowers at intervals throughout the loan period).
So, what affects the interest rate a lender offers you?
As we’ve said before on this blog, mortgage interest rates are not just about the borrower. They’re also about the lender, the market, and the economy as a whole. But there are some things you can control – at least partly:
No matter who you are or what you make, the following factors are outside of your control. Unfortunately, they still affect your mortgage interest rate:
So, if you’re shopping for a mortgage with a great interest rate, keep these factors in mind. Maybe you can increase your down payment or reduce your debt. Don’t forget to compare offers from different lenders; that too can help you find a better interest rate. If you’re not sure what your next move should be, talk with one of our mortgage specialists.