What to Know About Interest in St. Louis
When you go to buy a St. Louis home, you look at the asking price and eventually settle on an offer. If you subtract your downpayment and divide that number by 30, 15 or however many years your mortgage is supposed to last for, then you’ll get what you’ll pay each year. Divide that number by 12 and you have your monthly payments, right?
Well sort of. You have a rough estimate, but you haven’t factored in the interest rate. Interest is basically a fee from the bank. You’re borrowing their money, and now you’re going to pay a little extra back. Unless you’re making an all-cash offer on your home, you will probably be paying some interest.
Here is what to know about interest in St. Louis
How do these loans work?
There are several kinds of loans you can get, but the interest rates work in the same way. Let’s say you you get a 30-year loan for $200,000 with an interest rate of 4 percent. This means than over that 30 years, you will not only pay back the $200,000, but also 4 percent of that which is $143,739.
You would pay back this money every month in your mortgage payment, which would be about $955. Most of it would go toward paying off that actual loan amount and the rest would go towards paying down the interest.
In the beginning, you’ll be paying more interest and less of the principal amount. As your loan goes down, however, then you’ll start paying more of the original loan and less in interest. Use a mortgage calculator to help you figure out what your payments will be and how much will be your principal amount.
Not all of this is bad. In the beginning years of your loan, you will qualify for tax breaks, and you’ll be building equity into your home. As you do this, your tax breaks will go down, but by then, you won’t need the tax breaks as much.
When do interest rates change?
Interest rates change almost every day, and they change for several reasons. The economy and whether or not it is in a slump plays into the calculation. If there’s a chance of inflation, the Federal Reserve will restrict its funding, which will cause the rates to go up. If there’s a lull in economic activity, then rates will drop.
These changes can affect your interest rate and monthly payments, unless you get a fixed-rate loan. These loans do not change the interest rate from month to month, so if you can lock in at a really great rate, this can be a great deal.
Getting Low-Interest Loans
To get the best loans, you really need to be watching your money and your credit report. Lenders judge your interest rate based on your financials and your credit report. The better the report, the better the interest rate.
The type of loan you get will also play a role. Fifteen-year loans often have lower interest rates that the 30-year loans, and ARM loans will have lower rates than fixed-rate mortgages, at least in the beginning.