If you re thinking about buying/purchasing a home, one of the first considerations you may have is what kind of interest rate you are going to get/obtain on your loan.

There are some factors that determine the interest rate that you can control, and some that are completely out of your control. It is a good idea to recognize/know the difference.

One of the most important factors, and one that keeps hitting/makes the news all the time today, is your credit score. If you have heard discussions, or seen constant ads on the net/internet about your "FICO" score, you may now what the buzz/discussion is about.

The idea behind a FICO rating/score is that private agencies do an analysis on a borrower's credit profile to determine the chances that he will be able to pay the loan/mortgage. Banks subscribe to these agencies to receive these scores/this information. They are primarily determined by income level, job history, and history of credit payments.

Another factor that banks use to calculate the rate is the size of the deposit/down payment.

First of all, you are putting your own money/funds into the project; this gives the bank confidence that you are confident enough in paying back the mortgage/loan that you have committed sizeable upfront funds as a deposit/down payment.

Even though a higher down payment will help with the rate, many people who are looking to buy a home are paying rent and in order to accumulate/save for a higher down payment, the longer they would have to pay rent. If they consider that their rent payments could be mortgage payments building/increasing equity if they had a home, they want to buy as quickly as possible.

The maturity of the mortgage/home loan is also an important component in the determination of the interest rate of the loan. If a bank has to commit for a long/an extended length of time at a fixed rate, they will want to protect themselves by making/fixing the rate higher.

Taking a shorter maturity on your mortgage, such as a five year loan instead of a 25 year traditional loan will result in a lower rate for you. However, most/many people still prefer to negotiate a longer term loan if they can because they/of the fear that interest rates will rise and they will constantly have to renew their mortgage/home loan at a higher rate. - hypotheque montreal quebec

This is one of the other important factors in determining/what determines interest rates: What the general market is doing. If interest rates are going up in general/across the board, interest rates on mortgages will go up as well, since banks have to pay interest on the money they obtain. Whether interest rates will go up or down is a topic/subject under constant study and discussion by economists.

Most people would rather take a chance on a fixed rate that can’t go up/increase, than a rate that changes periodically. Even if rates go down, they feel the risk is better to have a locked in rate than a fluctuating/changing rate - pret hypotecaire.

The last factor that can influence the rate on your loan is the size of the loan itself. Banks are limited as to the size of their loan portfolio, and if your loan/mortgage is sizeable, they will be adding a lot of risk to their portfolio and will expect a higher return for that higher risk.