Mortgage Questions - Interest Rates

How are interest rates determined?

Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase. Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.
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What is an adjustable rate mortgage? 

An adjustable rate mortgage (ARM) is a type of loan that often offers a lower initial interest rate than most fixed rate loans. However, the interest rate is not locked in and can go up and down throughout the life of your loan.
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Is comparing APRs the best way to decide which lender has the lowest rates and fees?

The Federal Truth in Lending Act requires that all financial institutions disclose the Annual Percentage Rate (APR) when they advertise a rate. The APR represents the actual cost of obtaining financing, by requiring that some of the closing fees charged at closing be included, in addition to the interest rate, to determine the cost of financing over the full term of the loan.

You can use the APR as a guideline to shop for loans but you should not depend solely on the APR in choosing the loan program that's best for you. APR is an effective interest rate - not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.
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Should I pay discount points in exchange for a lower interest rate?

Discount points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them up front at your loan closing in exchange for a lower interest rate over the life of your loan. So, it means more money will be required at closing, but you will have lower monthly payments over the term of your loan.
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How do I know if it's best to lock in my interest rate or to let it float? 

There is no sure-fire way to predict whether rates will go up or down.

If you have a hunch that rates are on an upward trend, you may want to consider locking the rate as soon as you are able. You will have to close your loan within a “lock in” period to keep the locked rate, so make sure that your loan can close within that time. If you're purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period.

If you think rates might drop while your loan is being processed, you may want to take a risk and let your rate "float" instead of locking.
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How much money will I save by choosing a 15-year loan rather than a 30-year loan?

A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower and you'll pay less than half the total interest cost of the traditional 30-year mortgage.

However, if you can't afford the higher monthly payment of a 15-year mortgage, a 30-year mortgage might be a better fit for you.
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When can I lock in my interest rate and discount points? 

You can indicate on your application that you would like to lock in your interest rate and discount points. You will have the opportunity to either lock or float the rate before you submit your application.
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Can I lock in an interest rate and discount points before I find a home?

Yes, you can. If you are applying for a preapproval and want to lock in your rate for 60 days on a fixed rate commitment or 180 days on an adjustable rate commitment, a $150 rate lock fee is required before submitting your online loan application. If you do not want to lock in the rate at this time, you are not required to pay a fee and the rate you select is not guaranteed. You will be asked at the end of the online application process if you want to lock in the rate.

Fees can be paid by VISA® or Mastercard or from your Capitol Federal checking or savings account.
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What is your home equity loan rate lock policy?

The interest rate market is subject to movements without advance notice. Because our line of credit interest rate is based on an index, the interest rate will change any time the value of the index changes – whether your loan has closed or not. If you apply for a fixed rate second mortgage loan, your interest rate will be locked at the rate on the date of application, provided that the loan closes in a reasonable period of time.
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Are there any prepayment penalties charged? 

None of Capitol Federal Savings Bank’s residential first mortgage loan programs have penalties for prepayment. You can pay off your mortgage early with no additional charges.
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