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First time home buyers often think that finding the house they want to buy is the most difficult part of the operation. But that's just until they start looking at mortgage rates. Most home buyers face a staggering number of options in terms of mortgages. Every bank has numerous different mortgage products, each with its own incentives. It's easy to be distracted by the flash and dazzle of free gifts and customized terms, but in the end the most important thing about any mortgage product is the interest rate. This article can help you learn more about interest rates and how to choose the right one for you.

The interest rate is the amount of money the bank is charging you in fees for the privilege of borrowing money. It's taken as a percentage of the total borrowed and it's usually calculated either monthly or bi-weekly (every two weeks). Over the life of a mortgage, even small differences in interest rates (from 2.5% to 2.5% for example) can add up to hundreds or even thousands of dollars over the life of your mortgage. Therefore it's important to try and get the lowest rate possible.

Interest rates are not set in stone. They change with time as financial markets rise and fall and they can also be negotiated, so even if you see a rate advertised you can still sit down with the mortgage officer at the bank and try to get a better deal. Another thing to keep in mind is that you may not be eligible to get the rates banks advertise on their posters. Banks give the lowest interest rates to the customers who have the best chance of paying their loans back. They judge you based on your past history with credit and on your credit rating, so if they aren't good you will end up paying a higher rate of interest.

Another way you can attempt to get a lower interest rate is to choose a variable rather than fixed rate, which means as the rates go up and down in the market so will your interest rate for your mortgage. The hope is that the rate will go down, but there's always a risk it will go up instead and cost you more in the long run.




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