How to Calculate your Mortgage Interest Rate

Mortgage interest rate is the rate at which the interest on your mortgage payments increases. If the rate is high, your payments will grow exponentially larger, which may put you in danger of foreclosure. If the interest rate is low, there will still be an increase, but it will be more manageable, and you would be more more likely to be able to make all your mortgage payments on time. The value of your mortgage interest rate depends on a number of factors. Knowing what they are will help you calculate your mortgage rate, ensuring that the value of your mortgage interest rate won't catch you by surprise.

Understanding Mortgage Interest Rates

Mortgage interest rates can be divided into two types - fixed and variable. Fixed mortgage interest rates stay the same until you finish paying off your mortgage while variable mortgage interest rates change depending on the market conditions and (to the lesser extent) your credit score.

Both types have their advantages and disadvantages. Mortgages with fixed interest rates tend to be more expensive then mortgage with interest rates. If the market conditions are good, variable interest rates tend to be lower then fixed interest rates. On the other hand, if market conditions are bad, fixed interest rates usually wind up becoming more affordable. Fixed mortgage rates also give you a measure of security - regardless of anything else that may be going on in your life, you will know that your mortgage rates will stay the same and you can plan your finances accordingly. Variable interest rates put you the mercy of the changing market conditions. The mortgage that may be affordable one month may become more expensive next month.

If you have a fixed mortgage interest rate, the calculations are easy. You will only have to do them once (when you get the loan). If you have a variable mortgage rate, the calculations will have to be adjusted on monthly basis.

Mortgage Interest Rates and Market Conditions

If you have a variable mortgage interest rate, you should try your best to keep track of the national and global markets. Stock prices are usually a good indicator of the markets' financial health. You should also pay attention to any news regarding employment rates, foreclosures and bankruptcies. This may help you anticipate the market changes ahead of time. In most cases, changes will be slight, and so will the changes in your mortgage interest rates.

Mortgage Interest Rates and Credit Score

Your credit score is an indicator of your ability to pay your obligations on time. This includes everything from credit cards to your auto loan. You can keep your credit score low by paying all your bills on time, avoiding taking on new loans and making sure you owe less than 50 percent of all credit extended to you.

Calculating Mortgage Interest Rates

If you are wondering about your mortgage interest rates, contact your mortgage's loan officer. You don't have to do to do it every month, but you should definetely do it if the stocks' value changes in a significant way. The loan officer will look up your credit score and the latest interest rates. The later information comes from your mortgage lender, and it is updated daily. The loan officer will then use this information to calculate your mortgage interest rate and report it back to you.