Best mortgage rate



Since the needs of one person vary from that of another person, there really isnt anything like a best mortgage rate. In fact, mortgage rate itself doesnt hold any meaning when considered in isolation. Mortgages are formulated as a combination of different rates and different terms/ durations of mortgage loans. Then again the mortgage plans might vary on the frequency of revision of rate (adjustable rates). So, the best mortgage rate is the one that works out the best for you in terms of the overall mortgage plan (and not just in isolation). In order to figure out the best mortgage rate, you need to first figure out your needs and your potential to take risk. Lets explore this a bit further.

Though there are various mortgage plans, there are just 2 types of mortgage rates i.e. fixed mortgage rate and adjustable mortgage rate. While the fixed rate is fixed for the entire term of loan, the adjustable rate adjusts itself after short intervals of time and based on a pre-determined index (like treasury security). Choosing the best mortgage rate for yourself, starts with choosing what type of mortgage rate (fixed or adjustable) is more suited to you. Generally, fixed mortgage rate is recommended for people who plan to live in the house for a long period like 20-30 years. So in that case the best mortgage rate would be the best mortgage rate among the fixed type mortgages. So, you will need to compare the fixed mortgage rates of various mortgage lenders in order to determine the best mortgage rate for you. However, if you plan to stay in the house for a short period only say 5-7 years, then the best mortgage rate for you would be the adjustable type mortgage rate. Here you will need to compare the adjustable mortgage rates (for similar terms and conditions) offered by various mortgage lenders in order to determine the best mortgage rate of adjustable nature. Moreover, the mortgage rates are also dependent on the term of loan i.e. the tenure of your mortgage. In fact, the best mortgage rates are available on the loan of the shortest duration. Whether you are searching for the best mortgage rate of the fixed type or the best mortgage rate of the adjustable type, your comparisons will always be based on the tenure of the loan. So, even before you start looking for the best mortgage rate, you need to decide on what tenure of loan you would want to go for and then decide on the type of mortgage (fixed/ adjustable) based on the duration for which you intend to stay in the house.

Besides that, people who are risk averse, generally treat fixed rate as the best mortgage rate. This choice of fixed rate as the best mortgage rate is based on the predictability associated with the fixed rate.

So, do not go by what your friend calls a best mortgage rate or what a mortgage lender claims to be the best mortgage rate. Best mortgage rate is really based on your needs and preferences.