Rhode Island Mortgage & Refinancing

Last Updated on June 9, 2017 by Taylor Welshe

Residents of Rhode Island have a lot to love about their home. They will never get tired of the abundant seafood options the state has to offer them, particularly the fresh oysters and lobsters. Hundreds of miles of coastline, amazing historical sites, and numerous outdoor recreational opportunities allow for its booming tourism industry. And the many beautiful and charming cities, such as Providence, Cranston, and Warwick, contribute to its attractiveness, and the main reasons home buyers choose to invest on real estate property here. (Source: Livability.com)

Home ownership rating

Those who would like to purchase a house in The Ocean State should note that cost of living here is higher than the national average. The main factor that drives this is housing. (Source: Sperling’s Best Places)

Despite this, more than half of all homes are owned and occupied. The state has a homeownership rating of 58.9%. (Source: U. S. Bureau of Census)

Real estate cost

Real estate in RI costs more than many other places in the United States. On average, homes here have a value of $247,400. This represents a $52,100 difference with the national median of $195,300. (Source: Zillow)

How much a home buyer will spend towards a property still depends on the specific type of dwelling he/she purchases. For example, those who want the least expensive can opt for a townhome, as their values average just at $81,139.63. Next on the list are condominiums, at $105,264.60, followed by PUD homes at $129,992.15. Single-family homes remain the priciest, with their values averaging at $140,686.55.

Availability of mortgages

Most home buyers don’t have the financial capability to pay for the entire selling price of the property they want to purchase. This is why they apply for a mortgage, which are basically loans or home buying financing services. Lending institutions use the house, specifically its value, as a form of security against the money they will shell out. Borrowers (referring to those who take out a mortgage) then have to make repayments for the loan every month, which includes portion of the capital plus interest.

In the state, home shoppers can choose between two primary types of housing loans: the fixed-rate and the adjustable-rate mortgages.

Understanding fixed-rate mortgages

Fixed-rate mortgages, as the name already suggests, are loans that come with unchanging interest rates. This is the primary reason most borrowers prefer them.

Their locked-in rates won’t change no matter how economic and market factors – such as employment rate, inflation, as well as foreign and stock markets – perform. Thus, consumers who have this type of mortgage remain protected and secured against sudden hikes in loan rates. They will keep paying the same amount of money towards their mortgage repayment every month, until they complete the loan term they choose. The most popular fixed-rate mortgage term in the state is 30 years.

How adjustable-rate mortgage works

The interest rate of adjustable-rate mortgages (ARMs), or variable-rate loans, change based on economy and market performance. Thus, borrowers who this kind of mortgage can expect their monthly mortgage payments to either increase or decrease.

The biggest advantage of ARMs is their “teaser rate,” which is the initial interest rate much lower than those applied on the fixed-rate ones. Lenders charge a minimal rate for the first few years of the loan, ranging from the first one to five years. After the agreed-upon period though, the interest rate can already move up or down.

Choosing between the two

Home buyers should base their decision on several components, including their guaranteed short- and long-term financial capability, how long they intend to stay in the same residence, their credit score rating, and how much they have saved up in the event they need to put a down payment.

Rhode Island consumers can seek the help of several organizations when they have trouble finding low-cost mortgages or making a down payment. Help is available from the Rhode Island Housing as well as the USDA Rural Development.

References:

Rhode Island Housing

USDA Rural Development