How To Calculate Intrest Rates For My Credit Score.
The credit score indicated on your report can have a major impact on the interest rates of your mortgage loans. A negligible deviation in the credit score can make you pay more on your loans as interest. Interest rates for different scores are usually calculated and pre-determined depending on a scenario analysis done using a fixed rate for 30 years, conforming with loan amount as high as $400,000 and sales price of $500,000.
Insurance and taxes are included and are priced assuming 1 discount per origination point. Going by this assumption, a score of 720 would attract an interest rate of 6 percent (APR = 6.149 percent), while a score ranging from 680 to 719 would charge you an interest at rate of 6.25 percent on aforesaid loan amount. Similarly, a score anywhere between 660 and 679 will lead to a rate of 6.375 percent. These rates keep on fluctuating and hence, should be
calculated using online mortgage rate calculators that calculate interest rates for different credit scores.
Another important principle behind the credit score-based interest rate calculations is that of mid-score pricing. Accordingly, in the event of two borrowers sharing a single mortgage, lowest among the two individual mid-scores is used to price the mortgage. A detailed comparison of interest rates for different credit scores for various kinds of loans can be obtained at financial websites, such as Equifax.com and myFICO.com. According to Equifax, for 30-year mortgage, 5.766 percent is the rate of interest charged for a score of 760-850. Interest rates can soar up to 10.117 percent for scores anywhere below 579. These figures, however, would vary significantly according to the type of loan and the loan term.
To conclude, credit scores are not the sole criteria to determine the rate of interest on a particular loan. There are a number of factors responsible for interest rate fluctuations and should be taken into consideration.