Adjustable Mortgage Rate – Check the Lender’s Margin

Every American dreams of owning a home, but with property prices touching the sky, this dream remains unfulfilled for many. Don’t let that happen to you. Seek the best mortgage rate and own a home. If your credit history is good, all the more better! You will be offered a low rate that would suit your repayment plan. Ask your lender about adjustable and fixed mortgage rate.

Rate of mortgage can change during the life of the loan depends on a number of factors such as your loan amount, the index it is tied with, the lender’s margin and much more. You should learn all about your programs and the rates so as to avoid paying more than that what is required on your mortgage loan.

The Lender’s Margin

The lender’s margin plays the most important role in deciding your adjustable rate for mortgage. So, know the margin mark up of your lender. Your lender considers this margin at the time of ‘adjusting’, which is resetting your rate of mortgage. This lender’s margin also tells how quickly your interest rate will increase or decrease when your lender adjusts your loan. If you compare two similar home loans that have the same interest rate, the loan with the higher margin will cost you more. It will also increase with market rate swings. So, make sure that you know the margin that your lender is setting up for your program.

The most common margin taken up by lenders is 2.75%. When you see that a lender is setting a margin higher than the margin for your current mortgage loan or second mortgage loan, sit up. He is probably trying to get more money out of you, as quickly as possible.

You could do the following to get closer to the margin of 2.75% while shopping for adjustable mortgage rate.

  • Know the risks involved as the market rate is forever fluctuating.
  • Consider paying to a point to buy down the margin.
  • Negotiate with your lender, hard and strong! Most lenders lower margins by as much as .5% if negotiated with.
  • Last, but not the least, ensure that you discuss the margin for your mortgage rate, so that your lender knows that you are aware of its importance. A lender would offer your margin reduction if you talk about it to him.
  • With prudence and some smartness, you can make your adjustable rate of mortgage, the best mortgage rate for yourself.