Mortgage Rate Reasoning

Many people want a mortgage, but they do not always know how to get one. They are confused about how to pay it back, how much they will owe and how the payments are regulated. Some even wonder if they can afford it at all. Does this sound like you?

First you need to understand that there are different types of mortgages to fit your personal financial needs. You can get short term or long term loans, and many in between or adjusted in other ways. So the time it will pay back the loan varies, and ultimately you can make that choice.

As for the rates, the amount you will need to pay back and how frequently you will make payments, also varies. Not only do different lenders offer different rates, but average rates change all the time. National Average Rates are usually hand in hand with interest rates. This is not always true, but generally it is. Interest rates are determined by the economy more than anything. It is analogous to supply and demand.

If there is high demand for homes but not as many homes built or sold at that time, the interest rates will probably be higher, making the mortgage rates lower as well. Usually if the economy is poor, the demand will be low, and the interest and mortgage rates low as well. When the economy is strong, the demand will be high and the interest along with the mortgage rates will also be high.

In addition to considering the National Average Rate, you will need to compare lenders and the variation in rates from one lender to another. Even though there is an average rate, some lenders will offer lower rates.

The mortgage rate is calculated by interest rate, points and APR. The interest rate is the amount of credit it will cost you to pay back your loan, in a percentage. If you have a 6.50 percent rate, you will be paying the lender 6.50 percent of the total loan amount each year, costing you that amount more than the loan amount. In other words, you are not only reimbursing the loan, but you are paying extra to compensate the lender for giving you that loan.

The Annual Percentage Rate (APR) is the final percentage you will be paying annually, and that is the interest rate combined with points. The points are called mortgage points, loan origination fees or discount points. If you pay more points up front, your interest rate will probably be lowered.

Chase Manhattan Mortgage currently (as of November 9, 2004) has an interest rate of 5.75 percent rate for a 30 year fixed rate. With .875 points that would come out to a 5.831 percent APR. In comparison, the 30 year average rate is 5.85 percent with .34 percent points. This shows that Chase has a lower rate than the National Average Rate, making its rates highly competitive and reasonable.

Chase strives for a positive relationship with its customers and puts you before their own profit interests. They have over 11 mortgage products with various rates and monthly payments, allowing you to select from many different mortgage plans. This is to not only to cater to your individual home finance needs, but to give you as low a rate as possible.