Most people’s single largest investment is the mortgage on a home. Mortgage lenders and banks will typically finance 80% of the purchase price of a home, with the buyer agreeing to pay back the loan plus interest over a set period of time. Learning the ins and outs of mortgages and the various loan options available will help you make an informed decision about which lender, rate, and program will best suit your needs.
The interest on a mortgage is typically calculated once per month. At the end of each month, your bank will multiply your loan balance by the interest rate on your loan, and then divide that number by 12.
Determining Interest Rates for Mortgages
Mortgages typically require monthly payments of principal (how much you borrowed) plus interest. Your loan repayment schedule, comprised of principal and interest payments, will be calculated using an amortization formula.
Paying off a loan over a specified period of time, say 30 years, is possible if you adhere to the loan’s amortization schedule. In the case of a mortgage loan with a fixed interest rate, each installment will always be the same price. As the interest rate on an adjustable-rate mortgage loan fluctuates over time, so does the monthly payment.
The size of your monthly payment is based in part on the length of your loan. Generally speaking, the longer the term, the lower the monthly payments will be. However, the longer you take to pay off your mortgage in full, the more you will end up spending on the home as a whole due to interest charges.
What Economic Factors Impact Mortgage Interest Rates?
Mortgage rates as a whole are determined by competitive market forces. Mortgage rates fluctuate daily based on numerous factors such as inflation, unemployment, and economic optimism. The likelihood of rapid economic growth, high inflation, and a low unemployment rate is usually accompanied by a rise in mortgage rates. When economic growth slows, inflation drops, and unemployment rises, mortgage rates typically fall.
Factors that can impact federal interest rates include, but are not limited to:
- Inflation (Higher inflation = higher interest rates)
- Growth of Jobs/Unemployment (Higher unemployment = lower interest rates)
- Bond Market (High demand for bonds = higher interest rates)
- Constant Maturity Treasury Rate
- Secured Overnight Finance Rate
Mortgage Lenders in Jacksonville, FL
If you or a loved one is in need of a Jacksonville mortgage loan, don’t hesitate to get in touch with one of our knowledgeable loan specialists. For more than a decade, Bayway Mortgage Group has been assisting homebuyers just like you. Contact us today for help with your mortgage loan!