Securing a low mortgage rate is the key to being able to afford a home. While it may be a bit of a challenge in this economic climate, there are a few things you can do to give yourself the best chance at a low rate.
Compare Rates
If you want to secure a low mortgage rate, you’re going to have to work for it. This will require you to do quite a bit of research. Compare rates with multiple lenders in order to find the best one possible. Ask lots of questions. When it’s all said and done, you’ll be happy knowing you got the best rate available to you.
Increase your Down Payment
Making a larger down payment on your home is another way to lower your mortgage rate. An article written for chase.com explains, “Simply put, the more money you put down towards your mortgage, the less you will owe on the loan. If you can make a larger down payment, you could have more equity in your home from the start. Not only will you need to repay less principal (the amount you owe on a loan excluding interest), you’ll also pay less interest over the life of the loan since it is calculated on the principal owed.
While some loans have low down payment options, the ability to pay more can reduce mortgage rates and monthly payments. The smaller the down payment, the riskier lenders view your loan, and the higher the interest rate you may have to pay.”
Refinance
If you took out your mortgage at a higher interest rate than what’s currently available, talk to your lender. Ask them if you meet the criteria to refinance your home. This can save you loads of money. It’s worth looking into!
Work On your Credit
The best interest rates are typically reserved for people with great credit. If your credit is fair or poor, this is something you should be working to improve. Speak to a financial advisor to find out the most effective ways to raise your credit score. Doing so will save you money long term. You’ll be able to secure a loan at a lower interest rate which will be good for your credit and your wallet.
Consider a Short Term Loan
Short term loans are less of a liability for lenders. A mortgage given over a 15 year period vs. a 30 year period typically comes with a smaller interest rate. The monthly payments will be larger because your loan is spread across a shorter amount of time. This type of loan will save you money in the long run, but costs more per month. Make sure you consider the terms of your loan carefully. Don’t sign up for something you can’t afford.
Securing the lowest mortgage rate is worth the time and research you’ll have to do to get there. However, you’ll be glad you put the work in!