Mortgage and Refinance Rates in Alabama

Today's Alabama Mortgage Rates

Looking to buy a home or refinance a mortgage in the Cotton State? Checking current mortgage rates in Alabama is just the start. What kind of loan would serve you best? Would you be better off with a conventional mortgage or should you go the FHA route? How much of a down payment should you make? Should you go with a 30-year mortgage or can you afford a shorter 20- or 15-year loan with a lower rate and save a ton of interest besides? Or should you consider an adjustable-rate mortgage (ARM)? And that's before you start looking for who has the lowest mortgage rates in Huntsville or who are the best mortgage lenders in Birmingham.

Sound complicated? Don't worry, we can help you through the process. We've assembled all the resources you need to find the best mortgage loan for your situation and at the best rate, including mortgage tips, articles on what you need to know as a consumer, and mortgage calculators to help you crunch the numbers for a wide variety of situations.

When you're ready to start, we make it easy to find the best Alabama mortgage rates for you. Just use the rate request form at the top of this page to get rates quotes tailored specifically for you from multiple lenders, based on your credit score, the loan amount, your down payment/home equity and other relevant factors.

Alabama mortgage rates

Shopping for Alabama home loans isn't like shopping for other consumer products – you can't just look at the price tag to see what's the better deal. For one thing, the price tag – the mortgage rate – may not reflect the true cost of the loan, compared to other offers.

The mortgage rate is just part of the picture – you also have to take into account the closing costs, or fees. For a home purchase or refinance, these usually equal 2-6 percent of the loan amount itself – so they have a significant effect on how much you're paying out of your pocket.

Making it even more complicated is that there's no standard set of fees on a home loan – different Alabama mortgage lenders will have their own fee structures. They all cover basically the same things – the origination fee, document preparation, the appraisal, etc. – but lenders may use different names for the same thing or one lender may lump several costs into one fee that another splits out among several individual fees. And some may be "junk fees" that don't reflect any service actually performed for you, but merely pad the lender's bottom line.

Fortunately, you don't need to sort through all those to find the best deal. Just find the lender who's offering you the best combination of rates and fees. But how do you make the comparison? A loan with a low rate but higher fees might cost you more than one with a higher rate but lower closing costs.

A handy way to cut through the clutter is by checking the APR, or annual percentage rate. This is a figure that takes all the costs of a loan, the interest rate and fees, and expresses the as an annual percentage reflecting the effective rate you'd pay if you rolled all the fees into the loan. The higher the APR, the more costly the loan.

While APR works very well on fixed-rate mortgages, it's less useful on adjustable-rate loans and it can be thrown off if you sell the home or refinance before you pay off the loan. So in those cases, you may want to use one of our mortgage calculators to work out the numbers yourself, though you can still use APR as a guide.

Types of home loans

Alabama borrowers have a lot of options when it comes to choosing a home loan. Some types will be more advantages for certain borrowers than they will be for others, and some may be designed for different situations. Here's a rundown:

Conventional mortgages: These are home loans backed by Fannie Mae or Freddie Mac, and are the most common type of home mortgage in the country. Available through most mortgage lenders, they're the first choice for most borrowers with good credit, who qualify for their best mortgage rates.

FHA loan: Alabama first-time homebuyers are often drawn to FHA loans, which offer less stringent credit requirements than conventional loans and have low down payment requirements as well. They're also good choice for borrowers with weaker credit, who can often get better rates with an Alabama FHA loan than they could with a conventional mortgage.

VA loan: These loans require no down payment to qualified veterans and active duty service members, and offer attractive rates as well.

Jumbo loans: For borrowers who need to exceed the lending limits on other loan types. Alabama jumbo loan rates are typically somewhat higher than on conventional loans and generally include stricter down payment and credit requirements.

Mortgage refinance: This is when you take out a new mortgage to pay off your old one, because the new loan offers some advantage over the old one, often a better rate, shorter payoff or to cancel the requirement for monthly mortgage insurance premiums (on some FHA loans). Alabama refinance rates are similar to those on home purchase mortgages for homeowners with the same borrower profile. Any of the above four types of home loans can be used to either purchase a home or refinance an existing mortgage.

Home equity loans: These are a special type of mortgage than allow you to borrow against the value of your home, by using your home equity as collateral. These are often used as home improvement loans by Alabama borrowers, though the money can be used for any purpose you wish. Alabama home equity loans come in two types: the standard home equity loan, where you borrow a sum of money and then repay it, and the home equity line of credit (HELOC) which works like a credit card secured by your home, giving you a line of credit you can borrow against as you wish.

Fixed-rate Mortgages and ARMs

For most prospective borrowers, the fixed-rate mortgage (FRM) is the first option to consider. The FRM offers the security of a stable monthly payment and interest rate. Once you've locked in your rate, it won't change unless you refinance. You'll also know exactly when your mortgage debt will be fully repaid.

ARMs, or adjustable-rate mortgages, have rates that change with market conditions. Adjustable rates start out lower than rates on comparable fixed rate loans but then may go up or down afterwards. Most ARMs start out with a fixed rate for a number of years, usually 3, 5, 7 or 10, before they start to adjust, providing some predictability. This makes them an attractive option for those who expect to sell or refinance again in a few years, or for borrowers seeking to minimize their initial mortgage interest payments.

Mortgage Tax Savings

Tax breaks used to be one of the big benefits of getting a home loan. But changes to the federal tax code, beginning in 2018, eliminated those for many homeowners. You can still deduct the interest paid on mortgage debt, discount points paid and property taxes, but it won't be worthwhile unless your total deductions exceed the new, higher standard deduction, which was nearly doubled, to $24,000 for couples filing jointly and $12,000 for singles.

Making it even more difficult, the total you can deduct for mortgage interest, discount points and property taxes is now limited to $10,000 for couples and $5,000 for singles. So you'll need a lot of non-mortgage deductions to put you over the top for itemizing. What's more, you can now only deduct the interest on up to $750,000 in mortgage debt (again, half that for singles) and can't deduct the interest on home equity loans at all, unless they're used for home improvements. (There are some exceptions for loans taken out prior to 2018).

Any good news? Couples can still write off up to $500,000 in capital gains realized when they sell your home and pay no income taxes on it. That's for your primary residence only. Singles can write off up to $250,000.

Not sure where you fit in? You can estimate your tax savings using our Mortgage Tax Savings Calculator to see what effect your new Alabama home loan will have on your taxes.

Comparing Mortgages

Comparing mortgage offers in Alabama can be a confusing process, particularly when you're diligent-as you should be-about contacting several lenders. You can make this search more efficient by reviewing individual offers by loan type first. In other words, review your adjustable-rate mortgage (ARM) offers separately from your FRM quotes. Once you pick the best in each category, you can use Mortgageloan.com's mortgage calculators to decide which is more appropriate for you.

As you're deciding, remember not to place too much importance on getting the lowest payment. Of course, you must have a payment that you can afford. But sometimes, a very low payment means you're carrying the debt for longer periods of time. There are two disadvantages to this strategy. Your overall interest costs will be higher, and it will take longer to build home equity.

Mortgageloan.com can help you find that best rate mortgage, whether you're buying a suburban Birmingham home, or a cozy weekend retreat in sleepy Delmar.