Advertised Utah interest rates generally reflect the national average. What they may not reflect is your individual loan situation.
Borrowers often believe, when they see a listing of “today’s mortgage rates,” that the listed rates accurately indicate what their home purchase or refinance loan will cost them. However, unless you obtain a personalized rate quote from a mortgage broker or mortgage lender, you have no way to accurately determine what your total borrowing costs will be.
In the mortgage industry, rates are driven by competition and demand as well as fluctuates in the securities market, unemployment, GDP, and the list goes on and on.
Contrary to popular perception, the rates set by the Federal Reserve affect the short-term borrowing of federal funds, but not mortgage rates. An increase in the Fed’s interest rate will primarily increase the interest rate on consumer credit such as auto loans and lines of credit extended to businesses.
Although mortgage rates may also increase slightly after an increase in the Fed’s rate, this is an indirect response that reflects an increase in the lender’s cost of doing business.
When you borrow money to purchase or refinance a home, you agree to repay the loan principal plus the agreed upon rate, which is calculated monthly (or, in some cases, daily) based on your loan’s outstanding principal balance. So, if you borrow $250,000 for 30 years with an interest rate of 4 percent, you will pay approximately $10,000 in interest the first year, or about $835 per month. If your monthly mortgage payments are $1,000, the difference of $165 will go toward paying down your principal loan balance. As you pay down the principal of your loan, more of each payment will go toward the principal.
This example presents a simplified representation of how your mortgage rate will affect your borrowing costs. Your mortgage broker can provide you with a more detailed explanation and an amortization schedule that illustrates these concepts in greater detail.
The mortgage rates you see when you do an internet search are typically expressed only in terms of interest rates for different types of loans (30-year fixed, 15-year fixed, adjustable/ARM, etc.). These rates do not include the various fees and closing costs that are a standard component of home loans.
Federal Truth-in-Lending (TIL) regulations require mortgage brokers and lenders to disclose rates to potential borrowers in terms of an annual percentage rate, or APR. The APR includes the loan’s interest rate as well as any certain fees and costs that will be incorporated into your loan.
Your APR will vary based on your qualifications as a borrower, the type of loan program you select and the amount of your loan. Buyers with imperfect credit and a less favorable debt-to-income ratio can expect to pay a higher APR than a buyer with perfect credit, substantial income, and no outstanding debt.
When you see mortgage rates identified as APR, you will get a slightly more accurate representation of what your loan costs might be. However, unless a lender is quoting you specifically, these figures still may not accurately represent your mortgage rate.
To get the best interest rate in Salt Lake City or anywhere in Utah, and to learn more about what your loan costs may be, talk to an experienced mortgage professional and request a customized mortgage rate quote.
At Advanced Funding Home Mortgage Loans, we believe in a fully transparent transaction. And that’s why we encourage you to obtain a custom, accurate rate quote based on your qualifications and the specific loan program you’re interested in.
Contact us today to learn more, or to request a customized Utah interest rate quote.