Factors that affect the mortgage rate

Read on and understand why published mortgage rates change.

07:45 06 August 2013

Lenders usually publish their lowest mortgage rate on their website or in newspapers. In a small fine print usually located below the ad or the web page, it says there that rates can change depending on numbers of factors. In this article, we’ll talk about these factors.

 

• Debt to income. When taking out a mortgage loan, the lenders would probably like to make sure that you only spend maximum of 30per cent of your monthly income on your monthly mortgage repayments. This reduces the risks for lenders and gives them assurance that you’ll be able to pay the loan. Should the monthly payments exceed this 30per cent of your income, higher interest rates would be applied.

 

• Credit score. This is one of the most important things that lenders take into consideration. Your credit score gives lenders an idea on what kind of borrower you are. Do you pay your loan in time? Do you handle your finances very well? The higher your credit score, the lower interest you’re going to get.

 

• Loan to value. The amount of loan that you intend to take out must compliment the value of the property that you intend to buy. Remember, the property is your collateral. The lenders must have an assurance that should you’re unable to pay for the loan, they can sell the property for at least the amount of money that you borrowed.