When prospective home buyers are wanting to purchase a home, oftentimes they will require some form of financing to assist them with the purchase of that home. In most cases, the prospective home buyer will seek out a lender, such as a bank or other lending institution in order to loan them the money required to purchase the home. The most common form of a home loan arrangement between a prospective home buyer and a lender is a mortgage.
Mortgages are the most common method of financing the purchases of home. Mortgagors, also known as the prospective home buyer(s) are the party seeking money and in exchange transferring the interest in land to a mortgagee, which is usually a bank providing the loan or other interest in exchange for the security interest in the land and repayment of the loan with interest.
A home loan rate generally refers to the amount of interest that a person must pay over the course of repaying their home loan. Interest rates are important when it comes to home loans. Lenders profit from real estate transactions by arranging for the borrower to pay back additional money over the total sum of money they are seeking to borrow. The difference between the money that is lent to the borrower and what is actually paid back to the lender over the course of the loan is known as interest.
How Are Home Loan Rates Calculated?
The interest rate on home loans is determined through an interest rate, which is often expressed as a percentage of the amount of the loan. While some home loans have fixed interest rates, other loans have variable interest rates that change over time. Home buyers will often base their selection of a lender solely on how much interest they will be paying on the loan over the course of repaying the loan.
The amount of home loan rates are subject to many different factors, including but not limited to:
- Current Market Rates: Current home loan market values, including the loan rates being offered by competitive lenders in the area;
- The Type of Loan: For example, if a home loan is being obtained for the purchase of a home, the rates will often be better than a home loan being obtained for home repairs or home improvements. Home loans for repairs or improvements often have short repayment terms and higher rates of interest;
- The Length of Time to Repay the Loan: As mentioned above, loans with shorter repayment terms may have higher home loan rates, whereas home loans with longer repayment terms may have lower rates. However, this is not always the case;
- The Type of Property Involved: If the property being purchased is meant to be one’s homestead, the home loan rates will often be lower. However, if the home loan is for the purchase of raw land that is to be developed, the home loan rates will be higher;
- The Credit History of the Borrower: Oftentimes a prospective home buyer with a higher credit score will be able to obtain a lower home loan rate than a prospective home buyer with a lower credit score; and/or
- Governmental Programs: There are government sponsored mortgage lenders, such as the United States Department of Veteran Affairs (“VA”), the United States Department of Housing and Urban Development (“HUD”), and the Federal Housing Administration (“FHA”) which also provide funds to prospective home buyers that qualify for their programs. For those programs, the federal government will set the home loan rates, and then lenders who participate in the programs will follow the set rates.
As can be seen, there are many different types of loans and factors that impact home loan rates. Once again, home loan rates may be fixed, but most often are variable loan rates that change over time. It is important as a borrower to understand how your home loan rate works, and the total amount of interest that you will pay back over the course of the loan.
One way of figuring out home much interest will be paid over the life of a loan is by requesting an amortization schedule. An amortization schedule is an important loan payment tool that helps keep track of loan payments and accumulated interest on a loan.
What Are Common Disputes Over Home Loan Rates?
Home loans are often the biggest transactions undertaken by an individual. As such, home loan and home loan rates can have lasting impacts on an individual. The following is a non exhaustive list of common disputes regarding home loan rates:
- Predatory Lending: Lenders may sometimes target susceptible home buyers, such as first time borrowers or elderly borrowers,in order to trick them into entering into a loan at abusively high interest rates or repayment terms. In these cases, the mortgage lender may be considered to be a predatory lender. The borrowers then may have a course of legal action to recover the damages they suffered due to the predatory lending practices;
- Discrimination: Federal law states that mortgage lenders are prohibited from discrimination against borrwers based on protected classes, including race, age, gender, religion, sexual orientation, national origin, or other federally protected characteristics outlined in the Fair
- Housing Act and Equal Credit Opportunity Act. These federal acts serve to protect home buyers from discriminatory practices of lenders, including inflating home loan rates to prevent home loans based on a protected class;
- Failure to Disclose: Failure of a lender to disclose certain information regarding home loan rates may give the borrower a legal defense to a foreclosure action brought later by the home lender;
- Failure to Pay Home Loan Rates: The most common legal issue surrounding home loans arises when a borrower falls behind on making payments on the principal balance and interest for a mortgage. Foreclosure is the process by which a lender can then leverage the security interest they hold on the borrower’s property, and sell that property at an auction in order to satisfy the borrower’s debts. It is important to note that there are specific rules and processes that must be followed during the foreclosure process;
- Changes in Home Loan Rates: As mentioned above, a home loan agreement may outline the factors in which a home loan rate may change from the initial rate. If the home loan agreement fails to outline when a home loan rate may change, or when both parties to the contract do not consent to the sudden changes in interest rates, legal issues may arise; and/or
- Mortgage or Home Loan Fraud: Mortgage fraud occurs when there was false or incorrect information provided on a home loan application by either party to the contract. In terms of home loan rates, when a lender promises one rate, and the rate is agreed upon, they cannot alter the home loan rate afterwards outside of the contract terms. If they do alter the rates, they may be committing mortgage fraud.
As can be seen, there are various different disputes that may arise regarding home loan rates. It is important for both parties to be fully aware of their obligations under the home loan contract, including the calculation of home loan rates. Oftentimes legal disputes arise when one party fails to fully understand the home loan contract.
Do I Need An Attorney For Disputes Involving Home Loan Rates?
If you are involved in a real estate transaction, whether as the buyer or the seller, you should consult with an area mortgage attorney. An experienced and local real estate lawyer will be best suited to helping you understand your state’s specific laws surrounding home loan rates, as well as what your legal rights and options are according to those laws.
Additionally, your real estate lawyer will also be able to help you understand your home loan rates, and obligations under your home loan contract. Finally, an attorney will also be able to represent you in court, as needed, should any issues arise related to home loan rates that require legal intervention.