You’ve heard it on the radio, or through commercials during your favorite sitcom, or maybe have seen billboards along the highway screaming the good news: mortgage rates are at an all-time low; lock in now and save later. While it is true that mortgage rates reached historic lows throughout the late 2000s and early 2010s, rates can vary widely depending on location, property demographics, and your own personal financial situation. Let’s discover what types of mortgage loan percentage rates you may encounter while shopping for a new home in Louisiana.
What Is the Rate on a 30-Year Fixed Loans?
Loans with 30-year fixed rate terms are considered the traditional backbone of homebuying in America. With this type of loan, homebuyers typically pay at least 20% of the cost of the home, with the rest financed. Payment amounts are a fixed rate throughout the entire term of the loan, although variables, like escrow funds collected for property taxes and home insurance, may adjust over time.
In Louisiana, as of April 2016, the average mortgage rate interest percentage is 3.74%, according to Bankrate, a leader in collecting home mortgage statistics. Generally, this percentage would be offered to homebuyers with excellent credit – 740 and above. With lower credit scores, higher interest rates can be anticipated. Additionally, if you have less money available for a down payment, you may be assessed a higher interest percentage.
With some mortgages, you can save money over the term of a loan by paying points during the closing process. These “points” equate to a 1 percent portion of the interest. For example, if you buy a point at closing, for a predetermined cost, you’ll then pay interest that is 1 point lower over the term of the mortgage.
What Is the Rate on 15-Year Fixed Loans?
Fifteen year mortgages have become popular with homebuyers who can afford a higher payment per month in return for paying off a mortgage in half the time. Although this means that each monthly mortgage payment is higher, 15 years’ worth of interest is saved in the long run. Additionally, banks typically offer much lower interest percentages with 15 year loans, knowing they’ll be paid back that much faster.
Currently, Louisiana mortgage rates for 15-year fixed rate loans are 2.71% as of April 2016, a nearly unprecedented low interest rate. This is a great deal for homebuyers if you can swing a monthly payment that’s about 50% higher than for a 30-year loan.
What Are Adjustable Rate Loans?
Adjustable rate loans were the boon of the early 2000s home-buying blitz, before the mortgage crisis showed that many homebuyers had been vastly underqualified for the loans they received. With an adjustable rate loan, buyers pay a fixed rate for the first part of the loan term, and then the loan’s interest rate can vary through the rest of the life of the loan.
For instance, for a 5/1 adjustable rate mortgage or ARM, buyers pay a fixed interest – currently 3.11% for Louisiana mortgages – for the first five years. Then, each year thereafter, the rate can adjust based on market rates. Sometimes, these rates can go down, but often they’ll be higher by the time the adjustable period begins.
Often, homeowners with less than excellent credit are attracted to ARM loans, because the rates are lower. They can gamble on having a better credit score before the adjustable period and then applying to refinance the loan at a fixed rate instead of paying interest at the whim of the current market. Adjustable rate loans may be your best bet, but planning for future affordability is also important.
The Future of Mortgage Interest Rates in Louisiana
Predicting mortgage interest rates is a tricky business. First of all, the Fed – the Federal Reserve System – controls the base interest rate within the United States. Using that base as a starting point, banks and independent mortgage companies then add on additional percentage points related to the geographic area where the loan will be made, the credit worthiness of the buyer, and financial safeguard factors determined by the institution.
Looking ahead in 2016, word from the Fed is that an April interest rake high “is unlikely,” according to the Wall Street Journal. This is good news for homebuyers and means that even if you don’t lock in a loan right away, you’ll likely still have access to lower Louisiana mortgage rates for a while longer. Although the Journal reports that several members of the Fed did favor increasing rates, that’s a far cry from the majority needed for that to occur.
On the flip side of the good news that April won’t bring higher rates is the reality that rates have been historically low for an equally historically long amount of time. Many analysts agree that it would, indeed, be prudent for people who are in the market for a new home to anticipate perhaps opening their wallets a bit more for monthly mortgage amounts.
As an example, a $100,000 loan with today’s 3.74% 30-year fixed-rate mortgage interest would cost $463 per month before any escrow amounts or other fees are assessed. Should that interest rate go up to 4.74% – still low compared to 10 years ago, but a lot higher than recent years – that same mortgage would cost homebuyers $521 per month, a difference of $58 per month. Although that may not seem like a huge amount of difference in a monthly payment, $58 per month can add up quickly. Multipled by 12 months per year for 30 years, that $58 a month is actually an additional $20,880 over the life of a loan.
As you work through the homebuying process, perhaps consider locking in your financial backing ahead of time – pre-qualifying – and ensure that you can find the best property at the best possible value and long-term cost.
2 Point Highlight
In Louisiana, as of April 2016, the average mortgage rate interest percentage is 3.74%, according to Bankrate, a leader in collecting home mortgage statistics.
Currently, Louisiana mortgage rates for 15-year fixed rate loans are 2.71% as of April 2016, a nearly unprecedented low interest rate.
