How is Your Interest Only Mortgage Rate Determined?

If you are shopping around, you may be wondering how your interest only mortgage rate is determined. When you get an interest only mortgage, your monthly payment is going to be all interest. Therefore, getting a cheaper rate will beneficially affect your entire monthly payment. There are a few different factors that go into determining your interest only mortgage rate. Here are a few things that help contribute to the rate you are given. 

Market Rate

One of the biggest factors in your interest only mortgage rate is the market itself. Interest rates in the market fluctuate based on a number of different factors. The Federal Reserve helps determine the interest rate by changing the rate at which it lends money to banks. Therefore, a lot of what makes up your rate is determined by when you decide to get the loan.

Credit History

Your credit history is another huge factor in what kind of rate you are given. Lenders like to work with those that have good credit scores. If you have a good score, you should be able to get a lower rate. If you have a checkered past, your rate may be a bit higher by comparison. 

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