5 years mortgage fixed rate
This calculator helps you compare a fixed rate mortgage with both fully-amortizing and interest-only adjustable rate mortgages (ARMs).
With mortgage rates near their historic lows, fixed rate home mortgages are likely going to be a much better deal if you plan on living in the house for an extended period of time, as when rates reset on ARM loans the prior short-term savings will likely be more than offset by the higher rates for the duration of the loan, which can cause the interest-only loan payment to exceed the amoritizing 30 year fixed rate payments if mortgage rates spike high enough. For your conveniene, Freddie Mac's PMMS rates have been included to the right.
A home mortgage is a loan from a lending institution that follows a written agreement between the buyer and the lender. Terms of the loan vary depending on the buyer's ability to match the current financial instrument with the predicted future situation in the household. In the past, a home shopper had confidence that the household income would stay relatively constant since jobs were sound and the economy was strong. Today, homebuyers struggle to accept long-term debt that could cause significant hardship if the local, or national, economy weakens even more. Sufficient information about the adjustable rate mortgage in comparison to the fixed rate mortgage should allow the home shopper to make an informed decision.
Benchmarks That Influence Mortgage Rates
Contrary to popular belief, financial institutions do not set mortgage rates based on random factors, economic events or weather forecasts. Banks are businesses with financial objectives that must be met to stay compliant with investor objectives and legal solvency requirements. State and federal government agencies enforce regulations to ensure that the bank has sufficient funds to back the depositors.
Mortgage rates are determined using a number of factors that will yield a return that makes the investment worthwhile for the institution. Losing money on mortgages is not a wise business practice.
- Freddie Mac, or the Federal Home Loan Mortgage Corporation is a public, government-sponsored enterprise that publishes a set of required net yield rates for fixed and adjustable rate mortgages.
- The 10-year U.S. Treasury note yield is an important benchmark for bank loan rates. Government obligations have been considered the safest investments available. Lenders offer a loan interest rate that is 1.5 to 2.0 percent above the 10-year note yield.
- Rate decisions from the Federal Reserve determine the rates lenders will pay to borrow funds from this quasi-private central bank of the United States. Discount rates offered depend on the bank and the season.
- Adjustable rate mortgages can be indexed to the Prime Rate, which is offered to the banks' best customers.
Economic indicators work together to reveal the strength of the economy to these powerful entities. The value of the U.S. dollar on the global currency exchanges is important since the banks are global entities. Consumers are wise to recognize the ever-changing conditions in the financial markets that cause the lenders to change rates often. Mortgage decisions are affected directly by the frequency of rate adjustments.