Home Loan Interest Rates: How They Impact a Growing Family

The process to purchase a home has several steps. First, you find a home. Next, the purchase requires financing. Once your family starts to grow, however, you realise that it is time to start the process again. Home loan interest rates are an important factor to consider. 

Home Loan Interest Rates – About

An interest rate is the fee a financial institution charges the applicant for lending them the funds. Therefore, home loan interest rates are the fees a lender charges for helping an applicant purchase a house. Rates are charged as a percentage, which is based on the principal amount lent.

Data gathered through February 1, 2021 estimated that the average home loan interest rate was 3.56% for variable. Fixed loans saw an average interest rate of 3.34%. Very well qualified applicants received an average rate of 2.69%. On the high end, the average rate was 4.52%.

In 2021, there are several tools available to those interested in purchasing a home. Thanks to the availability of information, an applicant can estimate their potential interest rate before submitting a mortgage application. This helps avoid surprises. Additionally, it helps the applicant prepare for the home buying process. By using an online mortgage calculator, you can also see rate changes based on the inputs. Inputs include annual net income, monthly expenses and number of dependents.

How Interest Rates Impact a Home Loan

An interest rate has a direct impact on a home loan. The rate causes the total amount paid over the life of the loan to increase. You may be lent $400,000, but the total amount you will pay back is higher. At 4% over 30 years, a $400,000 mortgage becomes $690,000.  Since payments are broken up into monthly bites, the actual total home loan amount becomes less daunting. 

How Interest Rates Impact a Growing Family

It is not uncommon for newlyweds to purchase a starter home. This is a nice way to build up real estate equity. Plus, it helps establish a positive payment history. Once a family begins to grow, though, it is time to find a larger home. In some cases, a larger home is not the priority. You may be searching for a property with a backyard, which allows your children to enjoy the outdoors. Other families look for a new property near a specific school because it has a favourable rating. 

Interest rates impact a growing family because they increase potential debt. Ideally, the household’s income grows with the family to help offset the impact of those rates. A growing family already means monthly expenses increase, so financial literacy becomes more vital. A home loan applicant who understands the components of a mortgage is more likely to accomplish their financial goals.

Home Loan Interest Rates Conclusion

At Mortgage House, we understand that every home loan applicant is trying to get the most affordable rate. You also want to purchase the best home possible. Our team is ready to help.