You probably know from common sense that interest rates are the most important determining factors when choosing a mortgage loan. If you are still not convinced about this simple truth, just try running a search with the keywords ‘low interest rates’ and look at the ridiculous number of results you get. There are numerous lenders in the mortgage market continuously competing with each other; and quite a few serial buyers too. If you are not a serial buyer of mortgage or so to say a pro in mortgage business, you are probably lost. It is natural to be bamboozled by the absurdly growing number of people trying to tell you that they offer you the lowest rates. Really?! How low is lowest?

It is a very key question. An interest rate which appears to be low may turn out to be very expensive for you. More so, with adjustable rates of interest. There are several patterns and schemes in which interest rates are often scheduled for your mortgage. You may find a loan package very convenient for your financial situation, income and everything; but, do not make the mistake of thinking that you have caught a luscious looking salmon on your tackle.

For instance, assume that Bob is running very low on cash and can not pay a lot in the initial months. However, he expects to double his income in a few years, when he thinks he will be able to pay lot more towards monthly payments. Mortgage broker Pat has been in the industry for a few years and has seen several Bobs come and go. Pat gives Bob an inviting looking deal, where he will only pay $1000 towards his mortgage as monthly payments. However, after five years Bob will start paying $2000 monthly and cover up his interest charges.

Bob finds it suitably matching with his financial situation and shakes hand with Pat. Disaster is an understatement for what Bob has done.

He has missed the simple fact that for the first five years, whatever interest charges remain unpaid is added to his principal amount. So, every year his principal amount increases cumulatively. It is technically called negative amortization in the mortgage industry. Obviously, it had slipped Pat’s mind to explain this tiny little detail to Bob.

Interest rates in the mortgage market are essentially of two types; fixed and adjustable. You may have heard people telling you (particularly brokers who want to sell you fixed rates) that with a fixed rate of interest your life’s safe and everything’s hunky dory.

Do not go into all this; instead, do your own simple calculations. Both fixed and adjustable rates of interest have their pros and cons. If you are buying a fixed rate mortgage you are buying a mortgage at a higher rate of interest than the current going market rates. But, notwithstanding the changes in the market your rate of interest will stay put at the stipulated value. If market rates are on the rise and you are putting your property on mortgage for a long term period, it may be a good idea to buy a fixed rate mortgage.

However, if you expect the market to go plummeting it is probably the best time to buy an adjustable rate mortgage. First, you start off at a low initial rate of interest. Second, because the market is on a downward trend your interest and hence your monthly-payments keep going down.

Also, it is possible with several mortgage loans to switch from fixed rate to adjustable rates of interest. When you do this, bankers understand that you are taking advantage of market movements. So, usually there are charges associated with this shift. Get quotes from your broker about this charge.

If you’re taking up an adjustable rate of mortgage at any point of time you would want to do some research about the index rate it is attached to. And, also find out about the margin percentage point they add to the index rate.

In short do your research well, get the words out of Pat. Obtain an amortization schedule for your rate of interest, get a list of all the charges levied by your lender, do a little research about the index rate—believe me it is not difficult to find out the lowest low.