Apartment Interest Rates | Types of Apartment Interest Rates
Apartment interest rates can vary a great deal, and the better the rate the more you are going to profit from your investment. But it’s not always the best rate that you have consider. Sometimes it’s the type of rate that is best given the current economic climate and future forecasts.
There are three common types of apartment interest rates: namely, fixed rate, adjustable rate, and balloon rate. Depending on factors such as the term of your loan, the economic climate and your current financial situation, one type of interest rate may be preferable over another.
Fixed Rate
A fixed interest rate is an interest rate that neither increases or decreases over time. It is generally higher than an adjustable rate loan, due to the fact that it has no chance of increasing, and can mean that you end up paying a higher rate than you would with an adjustable loan rate if interest rates fall.
However, if the exchange rate is falling and the rate of inflation seems to be rising, it may be a good time to choose a fixed interest rate over an adjustable one. In addition, a fixed rate is often the best long term loan option, as the economic factors that determine the Prime Rate are less predictable in the long term. If your offer on a fixed rate is a solid one, it is almost always the best choice.
Adjustable/Variable/Floating Rate
An adjustable (aka variable or floating) interest rate may decrease over time, which is what most people who elect an adjustable rate over a fixed rate hope for, but it may also increase. Some people who choose an adjustable interest rate over a fixed interest rate are seduced by the lower initial amount due per month, and fail to take economic factors such as low exchange rates and inflation into account.
The shorter the term of the loan, the more accurate economic predictions regarding the Prime Rate are likely to be. With longer term loans, it can be more difficult to foresee unfavorable rate fluctuations.
Balloon Loan Rate
A balloon loan interest rate can either be fixed or “floating,” with the defining feature of having generally smaller monthly payments than either a normal fixed rate loan or adjustable loan, but also having the remaining unpaid balance due in full at the end of the repayment term, usually a considerably larger sum of money than the preceding monthly payments.
Five year balloon loans have a “reset” option at the end of their terms that recalculates the interest rate according to current apartment interest rates. However, the “reset” option may only be available to the borrower if certain requirements have been met, such as having had no late payments for a certain number of months.
In balloon loans without “reset” options, the borrower is assumed to be selling the property or refinancing their loan prior to the end of the loan term. Balloon loans can be risky, but in some cases are worth the investments.
Ask CRE Lender Which Apartment Interest Rates are Right for You
CRE Lender is valued as a loan provider for its practice of giving borrowers personalized, accurate feedback about which apartment interest rate is in their best interest. To work with professionals looking to find you the best rate possible, sign up with CRE Lender today.
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