Ohio Banking Rates

Understanding Ohio Mortgage Rates

For anyone planning to buy a home, understanding the mortgage loan process and Ohio mortgage rates is crucial to getting the best financing deal. With so many types of loans, lending institutions and other factors that can affect how much you pay for your home, you can’t afford to be in the dark. The following is an explanation of how different loans, terms and conditions will impact your mortgage rate.

Types of Mortgage Loans

Not all home loans have the same rates, which means the type of loan you ultimately choose will also determine the interest rate you pay. There are two main types of loans with differing rate structures:

Fixed Rate Mortgage: A fixed rate mortgage has an interest rate that remains the same for the entire term of the loan. That means monthly payments will generally be the same as well. Fixed rate mortgages are great for anyone who plans to stay in their home for a long time, wants a reliable mortgage payment or has a strict budget to follow.

Adjustable Rate Mortgage: An adjustable rate mortgage (ARM) has an interest rate that is fixed for the first few years, then changes after the introductory fixed period. ARMs follow a specific market or index that determines the adjustable rate. Though the intro rate is usually quite low, an ARM interest rate has the potential to either increase or decrease when it adjusts, and there is less predictability for the borrower in terms of payments.

Mortgage Term Length

The length of your loan will also impact how much you ultimately pay for your home. Generally, extending the length of your loan will also increase the rate slightly. It will also cause you to pay more in interest overall since the longer your loan, the more interest payments you make.

However, shorter loans have bigger monthly payments since there’s less time to pay back the principal.

Interest Rate Versus APR

When comparing rates, it’s also important to know that the interest rate is not the same thing as the Annual Percentage Rate, or APR. The APR is the interest rate combined with other costs associated with your loan like broker fees and closing costs, and expressed as a yearly percentage. The APR gives a more accurate picture of how much your loan will really cost each year.

A home is just about the biggest purchase you will probably ever make, so choosing the right loan is imperative. Remember to take your time and find the right financing option for your unique financial situation.