Mortgage rates are getting lower but not for some lenders.
It just used to be just a famous line from a Smokey Robinson classic but shopping around especially today can save your hundreds of dollars on your mortgage. According to TheStreet.com, one of the most important things to do when borrowing from your home equity is to look for the best deals around. The report states, “A search on BankingMyWay.com for rates in California, for instance, reveals US Bank offers a 60-month loan for 6.24%, while Central Valley Community Bank charges 6.75% on its 60-month loan. Other offers include an 84-month loan from Citibank at 7.4% and a 120-month loan from Sierra Bancorp for 7.577%.” In other words, do not jump into one rate that you think is low enough. Mortgage rates are fast plummeting but your nearest lender may not necessarily offer the right figure for you.
Researching for the best rate is necessary especially to those who want to refinance. While rates may move depending on the trend of the 10-year Treasury bond’s yield, lenders differ in terms of how they charge the interest to the borrower. Fixed costs including processing fees, appraisal charges, credit report, document fees, etc. are applicable to all mortgages regardless of the size of the loan. Therefore, small loans’ will be given higher interest rate so that the lender can recover the difference in fixed charges between the small and large loan. The interest rate depends on each lender’s calculations.
Another factor is borrower location. Those who reside in areas with falling home values face the risk of defaulting later on. As lenders perceive this higher risk, they’ll compensate it by offering a much higher rate compared to a borrower who lives in an area with a more stable pricing trend. Because lenders are subjective while considering their risk computations, they offer varied rates. Also, large loans above $417,000 receive higher interest because these aren’t guaranteed by Fannie Mae or Freddie Mac. It pays to consult several lenders to find the right rate.