Financial Facts: Interest rates versus types of property |

Financial Facts: Interest rates versus types of property

Bob Kieber
Special to the Daily

A 30-year fixed rate mortgage is a 30-year fixed rate mortgage, right? Wrong! There are fully amortized 30-year mortgages and then there are interest-only 30-year mortgages. There are 30-year mortgages for primary homes and ones for second homes. If you are looking into rates on investment property, the 30-year rates are different than for a primary home or even a second home. Is the property a condo? Rates for high-rise condos primary homes may be much different than a low-rise investment property.

Do I have you confused yet? Think of shopping for a mortgage like you would if you were shopping for a new car. What color do you want? Two doors or four doors, two-wheel drive or front-wheel drive, or four-wheel drive?

Pricing out a mortgage can be as complicated as pricing out a new car. There are dozens of variables. Primary homes, second homes, investment property. Single-family homes, condos, town homes, low-rise condos, high-rise condos. And what are the borrowers credit scores and how much of a down payment is the buyer making?

Then there is the loan amount. I am old enough to remember when a loan of $50,000 was a decent size loan. Now many lenders may penalize the borrower with an interest rate increase if the loan amount is not over a specific dollar amount.

And how about a fully amortized loan versus an interest-only loan. One would think that the interest rates would be the same, but guess what, the interest-only loans generally have an interest rate of up to one-quarter percent above the amortized loan.

Now let me add even more categories to confuse you more. If the condo complex has time shares in it there could be an interest rate increase. This is also true if the condo complex is considered a condotel. Being a condotel may greatly increase the interest rates.

I have gone to great lengths to show you that the pricing out a mortgage is not as simple as one would think. There are many variables that the mortgage professional needs to know to properly find an interest rate for you, the buyer. If you make a call to a mortgage lender and you ask for a rate on a 30-year fixed-rate mortgage and you get a quick response I recommend that you use caution because it is unlikely a qualified mortgage lender is going to give you such a quick response without knowing all the facts to numerous variables.

So as a buyer you should know up front and in advance that different properties may have different interest rates. Borrowers with higher credit scores may have lower rates than those borrowers with lower credit scores. Certain loan amounts may have interest rate adjustments and borrowers making large down payments may have better rates than those borrowers trying to finance the entire purchase price.

Know that a good mortgage professional will sit down with you and go over all the items I have mentioned and make sure that you are well informed prior to you going out to even start the shopping for a property. Plan ahead and be informed, meet with your mortgage professional first.

For answers to your mortgage related questions call Bob Kieber at (970) 453-4700 or email him at Bob is a local mortgage lender with Millennium Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country. Member FDIC, Equal Housing Lender. NMLS Bank #477710 Broker #289610.

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