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What are mortgage rates and how do they work?

July 8, 2022

There are several aspects to buying a home, and it can feel overwhelming - especially if you’re unfamiliar with terms like mortgage rate, interest rate, and the types of loans available.

This is a big financial step, so it’s understandable that you want to make sure you understand what’s involved. Mortgage rates are a great place to start if you want to know more about buying a home!

What are mortgage rates?

Mortgage rate is the term used to describe the rate of interest charged on the mortgage for your home. The lender determines the mortgage rates, so they can vary.

Mortgage rates can be affected by the economy, time of year, and many other external and personal factors. The mortgage rate that you get will also be affected by your credit score or profile.

Because these rates are constantly changing and vary by person, it can be hard to know what yours would be. This is something that you’ll have to look into with using your personal information for more detailed results.

What types of mortgages are there?

There are two main types of mortgages out there - these work differently. If you want to buy a house, you’ll have the option to choose one of these mortgages, depending on your personal situation.

This choice can also affect the housing prices that you look into, as you have to think of the mortgage rates that you’ll be paying. 

Adjustable-rate mortgage

An adjustable-rate mortgage is a mortgage option that is not a set rate for your loan payments. This means that the mortgage rate that you have to pay on your loan could go up or down.

The lender has the ability to change the rate yearly instead of having the same rate. Most adjustable-rate mortgages still have a fixed rate for a period of time before fluctuating year to year.

Fixed-rate mortgage

A fixed-rate mortgage is the opposite of an adjustable-rate mortgage. This option keeps your rate at the same place until you have paid off your house loan in full.

This one gives extra security and takes away some stress that you might have otherwise felt.

How do mortgage rates work?

Mortgage rates are there to determine how much you have to pay off on your mortgage every year. This is going to depend on the type of mortgage that you have.

If you were to have a fixed-rate mortgage, you would have to pay a specific percentage of your loan yearly. If your lender gives you a 4% quote on your mortgage, you have to pay 4% of your loan balance every year until the loan is paid off.

With an adjustable-rate mortgage, your rates could change year to year depending on different factors. You may pay less on your overall loan this year and have to pay more next year.

Some adjustable-rate mortgages have a plan that has a fixed rate for the first five years. After that, your rates will change once every year going up or down.

How do you get a mortgage rate?

Mortgage rates are mainly determined by how the economy is doing. When the outlook is good, mortgage rates are better for those looking to buy a home.

If you can only afford to pay a high-interest rate, this can make it hard to find a house that fits your budget. This will make your mortgage more tricky and a longer commitment.

Your credit score and history of employment are also very important. Personal details like this can determine whether or not you can find a lender.

To get a mortgage rate, you’ll need to look around and get quotes from lenders. The lenders will look into all of the details to determine what kinds of mortgage rates you qualify for.

This is an important step in ensuring that you get the best rates possible. Getting different quotes will help you find the best deal out there for your particular circumstances.

Does bunq offer mortgages?

bunq is a great place to get a mortgage rate, as it offers a team of skilled professionals to help you out. You can get a detailed and personalized mortgage proposal within 24 hours!

bunq provides mortgage advice, as well as financial advisors who are there to help you find the best rate that applies to you. You can quickly get the process started and feel confident knowing that our specialists know what they’re doing.

Here’s another thing: we have a tool on our website to help you calculate the value of the loan you can get. It does this by calculating your annual income throughout the year. You can also add the annual income of your partner, if you’re buying a home together.

Mortgage rates explained

Mortgage rates can be tricky, but they don't have to be scary or mysterious. When broken down, mortgage rates are easy to understand and apply to your personal situation.

Wanna get the best deal out there that fits your needs? Contact us today to talk to one of our professionals about a personalized mortgage proposal.

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