Fixed rates. Fixed rates are the old standby. They are what you’ll find when you’re investigating traditional mortgages. When your loan has a fixed rate, your interest doesn’t change throughout the entire life of your loan. Most fixed rate mortgages last for 10, 15, 20 or 30 years. This is a great option when interest rates are low. If you can lock in an interest rate of 4%-8% for the life of a 30 year loan, you’re doing pretty well. However if interest rates are high, you may want to look for the next type of interest rate option.

Adjustable Rate Mortgage. Otherwise known as an ARM, an adjustable rate mortgage is just that – adjustable. Usually, lenders guarantee a rate for a specific period of time, generally three, five, or seven years. However, once that time period has expired, the interest rate on the loan will change to the current going rate. Generally, there is a cap on how high the interest rate can go. This is called a ceiling, and your ceiling will be documented in your lending agreement.

For example, if the current fixed interest rate is 10% and you decide you’d rather go with an ARM, which is generally lower than the current fixed rate, then maybe you could get an ARM at 7% guaranteed for five years. Once your five years have expired, the current interest rate could be lower than your current interest rate or it could be higher. If it is up to 14% that’s a huge jump and your mortgage will go up quite a bit; however, if you have a 3 point ceiling agreement in your mortgage your interest rate will only go up to 10%. With an ARM, your interest rate is subject to change every year after the initial reduced rate period has expired.

Two Step mortgage. A two step mortgage works very similarly to an ARM. You will lock in an interest rate, usually a bit lower than the going interest rate, for a designated period of time. Once that time has expired, your second step is for your interest rate to jump to the going rate. It’s a bit of a gamble because you don’t know what the future holds. However, it does enable you to get into your home at a lower interest rate.

Balloon. With a balloon mortgage your interest rate and monthly payment remain the same for a certain number of years. At the end of that time period, your loan is due in full. If you choose this option you will have to refinance, pay off your home, or sell your home. Balloons generally run for five or seven years.

There you have it. Just about any mortgage you come across will fall into one of these discussed categories. Happy borrowing!

Eddie Lamb owns LiveMortgageFree.com a website devoted to helping homeowners, first time buyers or tenants. You’ll get your own exclusive access to the program and bonuses that will get you on the road to living Mortgage Free and will change the way you view money forever. For more information visit: LiveMortgageFree

For an owner builder to lock in an interest rate on the permanent mortgage prior to even beginning construction on the home, it would be a great advantage. Consider that most loan products on simpler purchase and refinance mortgages will allow you to lock in the interest rate for a period of 15, 30, or maybe 45 days at best. Now consider that an owner builder loan has a typical construction timeframe of twelve months. That’s a rate lock that will need to last for 365 days.

Therefore, to achieve this unusually long rate lock, an owner builder will need to find a construction loan that is a true construction-to-permanent loan, meaning there is only one closing that covers the entire process. The land purchase, the construction phase, and the permanent mortgage are all wrapped into one product. In this way, the loan can establish the permanent rate up front, prior to the start of construction. And, in this way, the owner builder can take advantage of today’s relatively low interest rates.

Looking at the big picture, specifically the country’s long term history of interest rates, you can get a 30 year fixed mortgage today at an interest rate that is pretty close to the lowest rates ever available. In other words, there is no reason to believe that interest rates are going to go down over the long term. Focusing on the big picture, interest rates will have to trend higher eventually.

So, if you want to build your new home with an owner builder construction loan, you may need a full twelve months to complete the construction. You will be managing the process yourself, overseeing the sub-contractors and the delivery of the materials. Therefore, twelve months is not an unrealistic timeframe for the construction period.

If you can lock in your permanent rate now, prior to construction, you can protect yourself against the possibility of interest rate increases over the course of the following year. For example, an owner builder who locks in an interest rate of 6.25% today for a 30 year fixed mortgage on a $250,000 loan will save almost $60,000 over the next 30 years as compared to someone who gets a fixed interest rate of 7.25%. Just that one percent increase in rate will make a difference of almost $60,000 over the life of the mortgage.

Therefore, if your owner builder loan offers the option of locking in the permanent rate prior to construction, then you may want to jump at the chance while the federal government is attempting to keep rates as low as possible to stimulate the economy. However, some people will feel that locking the permanent rate now is depriving them of the chance to hitting the jackpot in case interest rates happen to decrease over the next twelve months.

Though interest rates today are relatively near their historic lows, there is always a chance that they could go down even more over the next year. Therefore, make sure that your owner builder construction loan provides some protection for you. For example, if your loan does not have any pre-payment penalties on the permanent rate, then you can always refinance once you are done building your home. This refinance will act like a second closing, so there will be some closing costs involved. However, if you plan to stay in the home for a long time, the savings over the life of the mortgage should be well worth it.

For an owner builder construction loan to offer a permanent rate lock that lasts a full twelve months instead of the standard 15 days or 30 days, it provides a great opportunity for you to take advantage of the current rates before you ever even hammer the first nail for your new home. And, if you want even more protection in the event that rates drop even more over the next year, then make sure your owner builder loan provides an easy means for you to refinance upon completion of construction – though you probably will never need it.

Chris Esposito works with the Owner Builder 101 program to provide owner builder construction loans for people who wish to manage the construction of their own homes, without hiring a general contractor. Visit OwnerBuilder101.com, or call (877) 876-3688.

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

October 9, 2008
30-yr 5.94 15-yr 5.63 5-yr ARM 5.90 1-yr ARM 5.15

October 2, 2008
30-yr 6.10 15-yr 5.78 5-yr ARM 6.00 1-yr ARM 5.12

September 25, 2008
30-yr 6.09 15-yr 5.77 5-yr ARM 6.02 1-yr ARM 5.16

The thing that jumps out here is that Arm rates jumped up less than rates on fixed mortgages. In fact 1 year arms hardly moved at all this week. This is probably because fixed rate mortgages have fallen more over the last 2 months. In contrast, 1 year arms have kept pretty steady the last few weeks.

Ok let’s look at what these rates mean for an actual mortgage payment. Looking at a 200k loan lets see what current mortgage rates translate into for a mortgage payment. In addition to today’s rates we also looked at rates from last week and last month.

October 16th
30-yr $1258.87
15-yr $1702.87
5-yr ARM $1217.16
1-yr ARM $1093.28

October 9th
30-yr $1191.39
15-yr $1647.99
5-yr ARM $1647.99
1-yr ARM $1092.05

September 25th
30-yr $1210.69
15-yr $1662.96
5-yr ARM $1201.67
1-yr ARM $1093.28

So as we can see the rate increases this week are anything but trivial. For a 200k mortgage the mortgage payment increased $67.48 which translates into a 5.7% increase. So what is going to happen in the next two weeks? Last week we said we didn’t know if rates were going to go up or down but we felt mortgage interest rates would probably be volatile given the current market. That’s what we saw this week and we continue to see a pretty volatile market. Additionally, I think the chance that rates will go down this week is greater than the chance they will go up. Basically, after a large move up or down rates tend to have a slight correction the next week. The other bit of news is that the government is having a 7,500 tax credit for first time home buyers. So hopefully that will to some degree offset the negative impact of higher interest rates. The real question is what is going to happen over the next few months. The hope is that the bailout will eventually lower mortgage rates. But the initial reaction (the largest jump all year) is anything but positive.

Ki lives in Austin and works as a realtor. His site has a tool that graphs mortgage interest rates along with a free mortgage calculator. He also tracks mortgage rate trends.

Fixed rate bonds from banks and building societies with a current base rate of 4.5% are usually immune to rate cuts. Hence these types of saving investments are quite capable of protecting the savings income. It is possible to earn up to 5.75% to 6% before tax on bonds fixed for two years. They are expected to remain strong even if the base rates of other savings fall to 2% or below in the early months of the New Year as some experts predict. Even though such predictions may be exaggerated most experts think the base rates are likely to fall substantially down to 2.75% and remain so for a while by the middle of 2009.

Analysts base their predictions on a similar trend in 1951 when the official rate was slashed to as low as 2.5% which is a record. When base rate was at 3.5% during 2003 savers were earning just 2.76% on Halifaxs two-year fixed-rate bonds where as other savings could fetch only about 1.24%.

However banks are expected to continue offering good rates on savings because there is a strong incentive for them to draw customers to their branches with sizeable savings deposits. Hence Libor rate are likely to remain above the base rate at somewhere near 4%. Libor rate is the interest rate at which bankers lend to one another. Banks and building societies are therefore likely to present fixed-rate bonds at around the Libor rate of 4% to enable them to attract more savings deposits from customers.

For those who are aged 50 or above one of the best options is to go for a one year fixed Saga bond at 5.48% with Halifax or Bank of Scotland. However a drawback of this scheme is that the interest rates are more likely fall during its one year duration than any semblance of an upward trend in the current scenario. Hence it is advisable to choose a two year scheme because even if the interest are low in the first year there is all probability that situation will improve in the second year onwards with corresponding increase in the interest rates.

For those who are looking for a two year fixed bond saving scheme the best option appears to be the deal offered by Nationwide between 4.6% and 4.72% depending on the size of amount deposited. The Cheshire Building Society is paying 4.6% on a minimum GBP1000. Bradford & Bingley where the deposit taker is Abbey pays a higher 4.8%. Moreover Cheshire and Nationwide offer a three year deal also at 4.6%.

Anjitha is a financial adviser and well known for his finance related articles . You can find more financial articles written by the author by visiting the following link .
mortgage payment tables

July 31, 2008
30-yr 6.52 15-yr 6.07 5-yr ARM 6.07 1-yr ARM 5.27

July 24, 2008
30-yr 6.63 15-yr 6.18 5-yr ARM 6.16 1-yr ARM 5.49

July 17, 2008
30-yr 6.26 15-yr 5.78 5-yr ARM 5.80 1-yr ARM 5.10

July 10, 2008
30-yr 6.37 15-yr 5.91 5-yr ARM 5.82 1-yr ARM 5.17

July 3, 2008
30-yr 6.35 15-yr 5.92 5-yr ARM 5.78 1-yr ARM 5.17

Ok so mortgage interest rates tell part of the story. But how does this translate into a mortgage payment. Using our free mortgage calculator lets translate the mortgage interest rates over the last few weeks into a mortgage payment for a 200k loan.

July 31th, 2008
30-yr $1266.76
15-yr $1695.28
5-yr ARM $1208.11
1-yr ARM $1106.88

July 24th, 2008
30-yr $1281.28
15-yr $1707.22
5-yr ARM $1219.75
1-yr ARM $1134.32

July 17th, 2008
30-yr $1232.73
15-yr $1664.03
5-yr ARM $1173.5
1-yr ARM $1085.89

So it looks like for now rates are still relatively high. The only mortgage product that remains relatively low is the 1 year mortgage rate. Comparing it to the 30 Year mortgage rate at 6.52 the 1 Year mortgage rate comes in at 5.27. For a 200k mortgage the mortgage payment with a 30 Year loan would be 1266.76. For a 1 Year Arm the mortgage payment would be 1106.88 or about 12.6% less. While I usually avoid Arm’s that is a pretty substantial different. The only problem with 1 Year Arm’s is that their is no guarantee mortgage rates will be less in one year. And with all the volatility in the mortgage markets right now they could be somewhat higher. Looking forward its hard to tell what mortgage rates are going to do over the next month. The FED’s refusal to lower rates would tend to push mortgage interest rates up but since mortgage rates rose so much over the last two weeks we can only hope that for the time being banks are satisfied with the current rates.

Ki works in Austin Texas as a realtor. His website provides information on mortgage interest rates along with a free mortgage calculator. Their is also graphs that show historical mortgage interest rates