Mortgage Rates Utah

What Is A Fixed-Rate Mortgage Loan?

A fixed-rate mortgage loan is exactly what it sounds like: a loan for which the interest rate does not change over time. These loans are ideal for borrowers who want stability of set payments or those who don’t want to gamble on rates going up or down.

Another key reason to choose a fixed-rate mortgage is a suspected increase to interest rates. If you lock in a flat rate now, and then interest rates rise over the term of your mortgage, your rate will stay the same and you could save money.

How Does A Fixed Rate Mortgage Work?

A fixed rate mortgage loan typically lasts between one and ten years. During this period of time, your mortgage loan rate is fixed, so both your interest rate and required payments won’t change.

A fixed rate mortgage loan is best suited for those who are trying to stick to a budget. The payments and rate are fixed for a particular amount of time, which can be beneficial for some but also unfortunate for others. The unfortunate side of fixed-rate mortgage loans is that you are stuck with the fixed rate if variable interest rates decrease during the fixed period. 

Before you choose which loan is best for you, make sure to evaluate your current financial situation. Our experts at UFirst Credit Union are here to help you find the right mortgage loan for you. 

Types Of Fixed-Rate Mortgages

15/20/30-Year Mortgages: Fixed-Rate Mortgages come with pre-agreed maturity dates. 15-year, 20-year, or 30-year maturities are the most common lengths. A 15-year fixed-rate mortgage means that you’ll be paying monthly payments on the value of your house for 15 years. A 20-year means you’ll be paying for 20 years, and so on.

FHA Mortgages: An FHA mortgage is a mortgage that is issued by a private entity (such as a bank or credit union), that is then insured by the Federal Housing Administration. Such mortgages typically come with looser requirements for down payments and credit scores.

“No-Fee” Mortgages: While they might sound great, no-fee mortgages are not a free lunch. Instead of charging fees upfront for appraisals, insurance, processing and other expenses, the lender instead just factors all of that into the interest rate for the loan. That means slightly higher monthly premiums, with less cash outlay at the beginning of the mortgage.

Fixed-Rate Mortgage Loan vs. ARM Loan

Choosing between a fixed-rate mortgage and an ARM (adjustable rate mortgage) loan can be tricky. On one hand, a fixed-rate mortgage allows for more predictable expenses. That means more effective financial planning and a more stable budget. On the other hand, if budget stability is less of an issue for you, and you can pay off your loan quickly, an ARM loan has the potential to save you money.

While a fixed-rate mortgage charges a fixed interest rate for the entirety of the loan, an ARM loan fluctuates according to economic status and federal interest rates. An ARM loan rate consists of two parts. The first is the base rate, which is calculated using some combination of the federal funds rate or the London Interbank Offer Rate. The second part is your lender’s spread that’s stacked on top of the base rate, so your lender is protected in case of a low-rate event (like a recession). The spread is stable, but the base rate changes. Therefore, if you think federal rates are going to decrease, an ARM loan could be for you!

Getting The Best Mortgage Rates In Utah

There are several key components that factor into the rate you’ll be charged on your mortgage. All of them relate directly to one concept: risk. Specifically, a lender will charge higher interest rates for higher-risk borrowers.

The most effective way to lower your mortgage rate is to lower the risk your lender must face in taking you on as a borrower. Establishing a strong credit history shows a lender that the chances of you failing to pay them back are as low. Maintaining a high credit score is a great way to do this, because having a high credit score means you always pay your debts.

You can also put more money down before you take out a mortgage. If you’re buying a $250,000 house, and you ask a bank for the full $250,000, that signals two things: first, it shows that you don’t have money for a down payment, which lowers your chances of having money for monthly payments down the line. Second, it increases the amount of money the lender must trust you to pay back.

Compare with first paying down $100,000 of the house’s value, and you can see why the lender might charge lower rates for higher down payments.

Finally, you should seek to limit your lender’s time exposure by opting for a 15-year mortgage rather than a 20- or 30-year. By subjecting your lender to fewer years of lending, you’re significantly lowering their risk and saving yourself money.

UFirst Credit Union Mortgage Rate Resources

Before you buy a house and secure a mortgage, you should do your research. Check out the resources below to learn more about house loans in Utah:

• Mortgage and Home Loans in Utah
• First Time Home Buyer Loans
• Construction Loans in Utah
• Condo Loans in Utah
• FHA Loans in Utah
• Adjustable Rate Mortgages

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