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Interest Rates

Interest rates, points and APR (annual percentage rate) are all part of your monthly mortgage loan payment calculation. The higher the interest rate, the higher your monthly payment will be.

Many loan products allow you to lower your interest rate by paying more "points" than may be required. These discount points are fees paid to the lender at closing. Each point equals 1% of the loan amount. For a $100,000 loan, a point would equal $1,000. Paying a point's fee is a good way to save money on interest over the life of your loan. When deciding if you want to pay points you would consider how much cash you have available to pay points at closing and how long you plan to stay in your home and keep your mortgage. If you move or refinance before the breakeven point, it may not be a good financial decision to pay points.

Other costs are involved in your mortgage loan besides interest rates and points. The annual percentage rate (APR) shows the annual cost of a mortgage loan as a percentage, including the interest rate on the loan, points, mortgage insurance and closing costs over the life of the loan. The APR enables you to compare terms of different loan products, and is included in the Truth-in-Lending Disclosure that you will receive at the time a loan application is sent to you. The lower the APR – the lower the cost is for the mortgage.

Rate Lock Period

A rate lock is the mortgage lender's promise to "lock" the interest rate cost of the discount points for a specified period of time while your application is being processed. This rate lock period can vary in length, but is typically between 30 and 45 days.

Rate locks are the only way to "lock-in" a specific interest rate. However, if you decide not to use a rate lock and during your application process interest rates rise there are alternative methods available to you to decrease your interest rate. The most common options are to make a larger down payment and/or purchase discount points. Additionally, if you have good credit and your income far exceeds your debt, you may be able to qualify for a lower interest rate.

For assistance in finding out what interest rates, points and APR's are available to you contact your HomeBanc Mortgage Loan Officer today!