Understanding how mortgage rates are calculated

A mortgage is usually a 25 to 30 year loan. Understanding how the rates that you’re paying for are calculated is worthwhile.

08:52 11 July 2013

One important thing to understand about interest rates on mortgages is that each lender has its own rate that they are offering to borrowers. Because of this, it makes perfect sense to shop around in order to get the lowest and the best mortgage for you.

Credit ratings or credit history is also considered when determining the rates on your mortgage. People who have great credit score are typically charged lower interest rates. This is because lenders assume that the risk they’re taking for lending these people money is relatively lower.

On the other hand, people who have poor credit history usually get higher interest rates. They may also have a hard time getting lenders to approve their loan. For this reason, it’s very important for people who are thinking about buying a house to improve their credit rating before they apply for a mortgage loan.