Asked by robert blair  |  Submitted February 05, 2015

Does the interest rate differ based on how much the loan is for?

Example, when I look at current rate with excellent credit score, I was not given that, I was given higher rate and they said it is because the loan amount is low. Is it true that an interest rate can only apply to a high loan amount?

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  Answers  |  1

February 06, 2015

Loan sizes do influence mortgage pricing, but only marginally, and seldom enough to change the rate. For example, many lenders have surcharges on loans under $50,000. The adjustment is to the COST of the loan, though, rather than the RATE. Other lenders improve pricing on larger loans ($250,000 or more for example). Once again, though, the improvement is to the pricing of the loan. Loan size pricing adjustments typically start at .25% (so $250 on a $100,000 loan), and can go up to .75% ($1875 on a $250,000 loan). These adjustments, while significant, rarely are large enough to change the actual rate offered. It's likely that the lender you encountered offered a "teaser" rate based on highly defined terms (like a $400,000 loan, 40% equity, and 820 credit scores), knowing full well that few borrowers would meet those criteria. It's really important to read the fine print in all mortgage advertising to see what terms the promoted rates are based on,

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