What Are Interest Rates & Why Do They Matter?

Interest rates are essentially the cost of borrowing money. The higher the rate, the more you pay over time. Even a small change in your interest rate can add up to thousands of dollars over the life of your loan.

For example,  you would pay $71,012.13 more over 30 years for a $300,000 mortgage at an interest rate at 7% compared to 6% interest.  That’s why it’s crucial to understand how interest rates work and how to get the best possible rate.

What Influences Mortgage Interest Rates?

Mortgage rates don’t just appear out of thin air. They are largely affected by the broader economy. When the economy is doing well, interest rates tend to be higher. When the economy slows down, rates typically drop.

Another key factor? The secondary mortgage market. Lenders sell loans to government-backed entities like Fannie Mae, Freddie Mac, or Ginnie Mae, which package them into bonds that investors buy. Supply and demand in that market also influence rates.

Fixed vs. Adjustable-Rate Mortgages

There are two main types of mortgage rates:

• Fixed-Rate Mortgage: Your interest rate stays the same for the life of the loan (e.g., 30 years). This means predictable monthly payments.
• Adjustable-Rate Mortgage (ARM): Your interest rate starts low for a fixed period (e.g., 5 years) and then adjusts annually. This can be risky because if rates go up, so will your payments!

How to Get the Best Mortgage Rate

If you’re looking for the lowest interest rate, here’s what you need to do:
✅ Boost Your Credit Score – Higher scores mean lower rates.
✅ Increase Your Down Payment – The less you borrow, the better the rate.
✅ Consider Buying Down the Rate – You can pay upfront to lower your rate long-term.
✅ Work with an Experienced Mortgage Lender – A knowledgeable loan officer can help you navigate the options.

Why Do Interest Rates Fluctuate?

Rates change daily based on the mortgage-backed securities market, just like stocks. This is why a quote today might be different tomorrow!

Final Thoughts: Stay Informed & Get the Best Rate!

If you’re planning to buy a home, understanding interest rates can save you thousands of dollars. Work with a trusted mortgage expert (like us at Morgan Financial) to explore your best options.

📞 Need mortgage advice? Contact us today!

Contact us at Morgan Financial

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Contact us at Morgan Financial to discuss your mortgage options, whether you’re buying, refinancing, or just curious about your next steps in this evolving market!

Reach out now to get started on securing the home of your dreams or refinancing to save more on your current mortgage.