Strategies for Finding Lower Mortgage Rates
The interest rate you pay on your home mortgage will have a big impact on how affordable your mortgage is on a monthly basis, as well as over the many years as you make payments. You may not think that the difference of an eighth or a quarter percentage on your interest rate is significant, but even a small decrease in your interest rate can yield significant savings. Mortgage rates are near historic lows right now, but shopping around and following a few key strategies can help you to find the lowest rate possible when pursuing online refinancing or applying for a purchase loan.
Consider Buying Down the Rate
Many lenders will allow you to buy down the interest rate. This typically means that you pay an additional fee at closing, and this fee results in a lower interest rate throughout the life of the loan. Buying down the rate will result in a lower monthly payment, but you should also consider the total costs of the loan. Buying down mortgage rates is most beneficial for borrowers who intend to hold their loan for a longer period of time. If you plan to pursue mortgage refinancing or to sell your home in a year or two, buying down the rate may actually cost you more money. This is because it will take you time to recoup the savings in monthly payments and to justify the expense of the rate buy down fee.
Improve Your Credit Scores
Your credit rating has a huge impact on the interest rates you qualify for. If you have applied for mortgage refinancing or a purchase loan today and have been told your credit rating is resulting in higher interest rates, you may consider holding off on your mortgage application plans. By taking a few months to improve your credit rating, you may qualify for an improved interest rate. Consider reducing debt balances, paying off collections accounts and making all payments on time. These steps taken over the period of several months may improve your credit rating.
The interest rate you pay on your home mortgage will affect interest charges you pay with each monthly payment. While a slightly higher interest rate may only equate to a relatively small amount of money in your monthly payment, this money will add up over time to equal thousands or even tens of thousands of dollars. Consider taking steps to obtain the lowest rate possible when you apply for your next home refinance or home mortgage loan.