Secured Loan Rates

 The prices for food and gasoline seem to be rising hourly.  The housing market has slowed considerably and many loan institutions are not offering the same comparative rates as a short time ago. Many things may come under srcutiny and affect a borrow's rate.  The broker will  compare a borrower's credit score, current debt to asset ratio and borrowing history. The possibility of not paying off the loan is also considered. A potential borrower could have a near perfect record with a lender holding other notes from him, but one or two bad marks on their credit report can cause their secured loan rates to go up.

The amount of money available for home loans also affects the secured loan rates that may be offered.  These rates can be quite varied in the market today. As investors become nervous about a housing melt down there may not be as much cash available for home loans. Even those with good credit scores will be competing for the same credit dollars, increasing the mortgage rates on the available money.

Types of Loan Rates

A Fixed rate and adjustable rate mortgages are the two types of loans available. A fixed rate mortgage sets the mortgage rates for the life of the loan while an adjustable rate is controlled by the prime interest rate. If the prime rate falls, the mortgage rates fall, but if it increases the mortgage interest increases affecting the monthly payment.  The latter can be tempting and convenient the buyer must beware.  When the payment rises the buyer may not be able to make these higher payments forcing the buyer to sell. There may not be enough equity in the home to cover the loan.  Thus the possibility of defaulting may become a realty.  

Combination Loans

A combination loan is one that will tart with a fixed rate for a set time limit before it automatically transfers to an adjustable mortgage rate. For example, it may be possible to obtain a home loan with a fixed rate for two to 10 years, but at the end of the period the rate will be adjusted to match the prevailing prime rate.

This type of loan can create the same situation as the adjustable loan, when the mortgage rates rise, so does the monthly payment and if the rate goes up significantly, being able to afford the new higher monthly payments can be a problem. On the flip side, if the rate goes down significantly, it can result in higher savings from the monthly bill.

When shopping for secured loan rates in today's everchanging market it is important to do some comparison shopping. Different companies will have very different guidelines they use to set mortgage rates for individual borrowers. Rates can vary as much as a few percentage points between lenders.  The wise homebuyer will make sure they get the best deal possible.