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Interest rates for home improvement loans in New York can change throughout the day, due to many series of market factors that are beyond our control including the lenders’. A few of the common impacting factors in interest rates are; a borrower’s credit score, loan term, mortgage program of choice, and even overall economic conditions.
Having a better understanding in how interest rates move can be very helpful when it comes to shopping for a mortgage in Binghamton, especially when making the decision to lock in a particular rate.
Everyday Lenders base their rates on the activities of the market conditions of Mortgage Bonds, these bonds are also referred to as Mortgage Backed Securities (MBS). On hectic days a lender may even have to change their rate pricings up to at least five times a day, this is due to and based on the everyday market conditions.
Even though the rates are usually different for each program, it may be more considerable to examine both the monthly rate and the overall cost during the life of the loan in order to decide on which program may be beneficial to your needs.
Home improvement loan interest rates are tied to the federal reserve rate as are standard mortgage rates, so the best time to buy a home is also the best time to borrow to improve an existing one. The best time to borrow money for needed home improvements may be when the house is in disrepair and selling it is not an appealing option. Improvements will prepare the home for sale in the future and are usually less of a financial commitment than buying a new home.
You can expect rates to go up when:
When the economy is growing, or is expected to grow, stocks will likely become the more favored investment, and when investors buy more stocks, they purchase fewer MBS, which drives the price down.
When the prices of the MBS is lower, the yield increases. Since mortgage rates are based on the yield of the 30 year MBS, you would expect rates to increase in this environment.
You Can Expect Rates to Go Down When:
When the economy appears to be slowing or doing poorly, investors typically move their money out of the stock market and into the safety of the MBS.
This drives the price of these investments higher, which will then result in a lower yield. Since mortgage rates are based on the yield of the 30 year MBS, you would expect rates to decrease in this environment.
Since these market variables and expectations change so many times as economic reports are released throughout the course of the week, it is not uncommon to see mortgage rates change several times a day.
Being able to understand how the rates move is not necessarily as important as having a loan officer that is equipped with the technology and professional services to track and stay alerted at the precise moment rates can make a move for the better or worse.
What is a Lock-In?
Also known as a rate-lock or a rate commitment, this a promise made by a lender to set aside a certain interest rate and a certain number of points for you, this request is usually for a specific period of time during the process of your loan application, so in the chance of a rate changing, yours would have already been locked in.
It can usually take your lender several weeks or even longer to prepare all of your documents and evaluate your loan application, making a lock-in offer very useful when applying for a loan.
When your interest rate and points are locked in, you won’t have to worry about your rate increasing. However, this may also prevent you from being able to capitalize in a lower rate than the one that is already locked in, depending on the leniency of your lender, he/she may be willing to try and lock in a lower rate for you if there is a decrease in rates during the time period of the loan process.
What is a Loan Commitment?
It is important not to confuse the two different terms of a lock-in and a “loan commitment” even though there may be a lock-in option for loan commitments.
With a loan commitment, the lender is making a promise in creating you a loan in a special amount at some point in the future.
Typically, the lender’s commitment is only given to you after your loan application has gone through the approval process. This commitment would usually state the loan terms that you have been approved for containing the loan amount, such as; how long the commitment is good for, and the conditions required of the lender for creating the loan, very much like a receipt of satisfactory title insurance policy protecting the lender.
How Does Loan-to-Value Affect Mortgage Rates in New York?
Your Loan-to-Value (LTV) is one of many risk factors that banks take into consideration when originating loans that are secured by real property.
LTV is a measure of the amount of equity in a property compared to the loan balance. Interest rates tend to be more favorable for certain mortgage programs based on loan scenarios where the borrower has more equity or a larger down payment.