While searching for borrowing money we always look upto the maximum limit we can borrow along with the minimum collateral requirement a loan requires. A low-interest rate means easy monthly installments over a long period of time. We often decide on seeing the monthly installments rather than looking into the overall aspect of the actual amount we are paying back, the approval rate, reason for denial, etc.
There are a list of factors to be taken into consideration before applying for loan or mortgaging your property:
- Cost of your home- The interest rate is directly affected by the price of your apartment. A very high loan amount means higher interest. You have to balance between the phases you can cover and also consider the amount you are willing to pay back.
- Lower interest rates are mostly common for short-term mortgages. A 30 year long tenure would pose risk over a term of 10 and 15 years since the amount of interest payable is much more for a 30 year period than 15 years for the same amount of loan borrowed.
- Current interest rates are not fixed and are not the same every day of the year. The mortgage interest rates are set by various financial institutions that lend funds to one another.
- One of the eye-catching factors is the location of your property. The rural and urban locations have an influence over the interest rates which you might be qualified for.
- Your credit score is a biggest contributor to the mortgage rate. The summary of your borrowing history, payment history including late payments and missed payments, inquiries, credit cards, any existing loans, etc would provide an idea to the lender of how risky a transaction might prove with the borrower.
- A high credit score can yield you a low interest rate. Make sure to check your own credit report for any discrepancies and to make changes if there is an inappropriate history within your records.
- Your income is noted down as a first point to calculate whether you can pay back the loan you are expecting to borrow. Your outstanding debt, personal loans, other financial commitments will definitely be taken into consideration.
- The assets you have significantly influences the lender’s decision. It is checked in order for return payments in case of failure of loan amount.
- The GDP might as well influence the mortgage rates. With the growth in GDP, higher wages along with more number of customers seek mortgage loans for home purchases and other big investments. The overall demand increases the interest rates whereas the amount to lend remains the same.
The basic rule of supply and demand can be seen with the mortgage interest rates. The above factors of value of property, GDP inflation, credit score, income of the borrower plays an equal role with every other minute factor that acts during the bond construction. The financial health of the borrower will very well impact the GDP in return, as well as the interest rates that other borrowers might receive.