A fixed rate loan is a loan where, you guessed it, the interest rate is fixed. It’s set. It won’t change.
For the life of your loan, that rate will remain at whatever rate you locked into with your mortgage lender.
For example, if you and I kick off your home search together, one of the first things I will ask is if you’ve spoken to a mortgage lender to get pre-qualified. For the sake of this example, let’s say you have, and your interest rate is X% based on a 30-year mortgage.
Within the next month or so, you’ve purchased your home. Luckily for you, X% is actually the lowest mortgage rates have been since you kicked off your home search. Since you were locked in, you can rest easy knowing you saved some money in the purchase of your home. You can now pay off your loan knowing you timed it right, got in low, and can ride that out while others may not have been so lucky.
However, 12 months later, mortgage rates are now less than what you had when you purchased your home. Your loan remains locked at the rate you purchased with, however you technically can refinance, although you may incur costs to break that rate, especially if you’re refinancing for significantly less in interest.
In not so many words, if house hunting is in your future, then you want to keep an eye on interest rates for loans. If you don’t have the time, or would like me to keep you posted, feel free to reach out and I can give you some tips on where you can look.
Of course, if you’d like to discuss with an expert loan officer, I’d be happy to put you in touch with a number of mortgage lenders whom I’ve done business with in the past and trust wholeheartedly to do right by you.
Let me know how I can help.