How are interest rates calculated?

Interest rates have a remarkable effect on the overall cost of mortgage bond finance over the term of the loan. You need to understand that capturing correct and complete information prior to the submission of the application impacts the scoring decision of the bank, which in turn affects the interest rate decision of the lender. A home loan expert will be able to provide the homebuyer with the best advice on how to secure the most favourable interest rate and therefore will discuss with every homebuyer the following important factors which influence banks’ pricing decisions:

### Advantage of a Deposit

A deposit has the benefit of positively affecting the interest rate of the home loan. A 100% loan will possibly increase the interest rate or pricing. The bigger the deposit the better the rate the bank will consider in the light of the reduced risk.

### Good Credit History

A good credit record also has a potential benefit of a more attractive interest rate pricing from the lender. _What determines interest rate?_ 1. Size of loan 2. Risk in terms of Loan-To-Value ratio 3. Scoring of the application 4. First time homebuyers are seen as higher risk as they do not have a track record of repaying a home loan 5. Full time employed versus self employed 6. Building loans are considered to be more risky than loans against completed properties 7. Existing customer of the bank or not