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Several Factors Affect Your Mortgage Rate
| |
Increase |
Decrease |
| Amount of Loan |
Rates Up |
Rates Down |
| Length of Loan |
Rates Up |
Rates Down |
| Adjustable Rate |
Rates Down |
Rates Up |
| Down Payment |
Rates Down |
Rates Up |
| Discount Points |
Rates Down |
Rates Up |
| Closing Costs |
Rates Down |
Rates Up |
| Credit Quality |
Rates Down |
Rates Up |
| Income Level |
Rates Down |
Rates Up |
| Lock In Period |
Rates Up |
Rates Down |
The amount of your loan can increase your interest rate if the amount financed exceeds the conforming loan limits established by CMHC and GE. The conforming loan limit changes at the beginning of each year.
Shorter loans, such as 20 year or 15 year note, can save you thousand of dollars in interest payments over the life of the loan, but your monthly payments will be higher. An adjustable rate mortgage may get you started with a lower interest rate than a fixed rate mortgage, but your payments could get higher when the interest rate changes.
A larger down payment – greater than 25% - will give a much better chance of being approved, and will save you the cost of CMHC or GE Insurance. Down payments of 5% or less should expect to pay a higher rate as you are starting with less equity as collateral.
Credit quality and debt-to-income-ratio affect the terms of your loan through your Beacon Score. If you have good credit and your monthly income far surpasses your monthly debt obligations, you will get approved at a lower interest rate. However, if your monthly income barely covers your minimum debt obligations, even if you have a good credit report, you will not receive the lowest available interest rate. |
