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| An
overview of Residential Interest Rates |
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An interest rate is
the "price" to borrow money. A mortgage interest rate is the
price of money loaned against the security of a specific
property. The interest rate is used to calculate the interest
payment the borrower owes the lender. The rates quoted or
advertised are annual rates. On most home mortgages, the
interest payment is calculated monthly. Hence, the rate is
divided by 12 before calculating the payment. |
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| Take a 6% rate, for
example, and assume a $100,000 loan. In decimals, 6% is .06,
and when divided by 12 it is .005. Multiple .005 times
$100,000 and you get $500 as the monthly interest payment. |
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| Suppose the
borrower pays $600 this month. Then $500 of it covers the
interest and $100 is used to reduce the balance. One month
later, when another payment is due, the balance is $99,900,
and the interest is $499.50. The interest rate stays the same,
but the interest payment is lower because the balance is
lower. Your payments will be determined according to the
amount of debt owed to the lender plus the interest rate on
which the loan was issued to you. Reduce the loan amount and
shorten the term and your interest payments will fall. |
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| Whether either is
in your interest depends on the circumstances. Reduce the loan
amount and you need to come up with more cash for the down
payment. Shorten the term and you have to make a larger
monthly payment. Borrowers can reduce the term on their own at
no cost, either by taking a shorter term at the beginning, or
by systematically making extra principal payments. |
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| Can I
borrow at the rates I see quoted in the media? |
| Every situation is
unique. The quoted rates are based on numerous assumptions,
such as that your credit is good, you have enough income to
qualify, you can document your income and assets, you will
occupy the house as your primary residence, employment
history, and on and on. If you don't meet all the assumptions,
your rate will be higher. In addition, the quoted rates apply
today. Rates are reset every day, so tomorrow they may be
different. What matters are the rates quoted on the day you
lock the terms of the loan |
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| At Montgomery Mortgage Capital we take each
loan application with the utmost professionalism and care. We
like to form long-lasting relationships with every client and
we expect to be yours and your families mortgage company for
life. Rest assured that we will help you finance your Home
Ownership Dreams. |
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