Changes in Mortgage Interest Rates: 6 Factors that Determine Mortgage Rates

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Troy Reichert

Troy Reichert

Troy Reichert is the owner of Reichert Mortgage LLC. With over 20 years of serving the United States Airforce, Troy wants to continue to give back to the community by helping give people their best chance at securing a home.

There is no real way to predict what mortgage interest rates will be, so it is important to have a professional to walk you through the mortgage process to find the best rates.

As a mortgage broker in Colorado, The Reichert Mortgage Team prioritizes our clients’ understanding of mortgage nuances, including mortgage interest rates. Although mortgage interest rates fluctuate, knowing how mortgage rates are determined can make a huge difference.

Block image with a silver house key chain with a single key and the title 'Changes in Mortgage Interest Rates'

What Are Mortgage Interest Rates?

Mortgage interest rates are a percentage of your total loan balance that reflects the annual cost to borrow money. As it is a percentage, your mortgage interest rate varies based on the size of your loan. Generally, bigger and smaller mortgages have higher interest rates. In turn, these interest rates will affect your monthly payments.

How Are Mortgage Rates Determined?

As mortgage rates change frequently, it is beneficial for you to know the factors that determine mortgage rates. Understanding these six factors will leave you better equipped to navigate the mortgage process.

Market Value

Market Value – With the fluctuation of the stock market, your mortgage interest rate will also fluctuate. When the stock market is going strong, interest rates will be higher. On the other hand, interest rates are lower when the stock market dips.

Credit Score

Credit Score – Your credit score reflects on your trustworthiness as a borrower. The higher your credit rating, the better your interest rate may be.

Down Payment Amount

Down Payment Amount – The amount you put down directly affects your interest rate because it generally lowers the overall loan amount needed. So, the larger the down payment, the lower the interest rate.

Property Situation

Property Situation – The specifics regarding the property you are mortgaging will also affect your interest rate. Characteristics like the location and size of the property push the interest rate one way or the other.

Loan Specifics

Loan Specifics – type, amount, & term length – There are many different loan types, including Conventional Loans, FHA Loans, and VA Loans. Each type of loan is a little different in regard to interest rates. This has to do with the specific features they cover, as well as the amount that can be distributed to individuals. Along with this, the term length will also affect the interest rate. Usually, short term loans have smaller interest rates.

Interest Rate Type

Interest Rate Type – There are two types of interest rates to choose from: Adjustable and Fixed Rate Mortgages

  • Adjustable Rate Mortgages – A mortgage with rates that vary up and down from year to year. These are usually combined with periods of fixed rates such as 7/1, 5/1, and 3/1, in which the first number is the number of years on a fixed rate while the second number is how often the rate is adjusted consecutively.
  • Fixed-Rate Mortgages –  A mortgage with a consistent yearly rate agreed to by the lender and the home buyer, usually in periods of 30, 20, 15, or 10 years.

Want To Talk About Your Mortgage Interest Rate Possibilities?

With years of experience, The Reichert Mortgage Team is no stranger to mortgage interest rates. If you would like more information about mortgage rates in Colorado Springs, contact us today. We are honored to provide residential mortgages for any location in Colorado. Learn more by speaking with one of our qualified lending professionals!

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