Mortgage rates have been kinda bipolar over the last few years. They’ve gone from literally historic lows in the 2-3% range to 8-9% more recently. High rates plus inflation has pushed the median mortgage payment up 69% since 2021! And with our mortgages likely being the biggest single expense every month, it’s important to try to find ways to save no matter how much it is. So, we’ve got some great suggestions that should help you out in that department.
Here are Five Fast Facts on reducing mortgage rates:
- 🔍 Know Your Lane - As the mortgage rate goes up, it means your monthly payment goes up. That has a trickle-down effect on both the down payment you need to pay and the total home price you can afford. Make sure you use a mortgage calculator to account for current rates and shop accordingly.
- 📈 Get Your Score Up - Your credit score is a huge part of your ability to borrow money because it shows how risky you are to pay back the money you’re borrowing. The higher your score, the lower the risk of you defaulting on your loan. Lenders will charge lower interest rates to lower risk borrowers, so the higher your score, the better rate you’ll get (and save money every month, yay!). Pay your bills on time, keep your debt as low as you can, and make sure you clean up any inaccuracies on your credit report to help boost your score as high as possible.
- 👀 Shop Around - Lenders are like car dealers, so shop around, get multiple quotes, and compare your options. Borrowers who get at least two quotes reduce their mortgage rate by an average of .2 points (like from 7.2% down to 7.0%), which can save hundreds of dollars each year. Getting four quotes doubles those savings. Be sure to get all those quotes within the same month - credit bureaus will view that as just one credit pull, which doesn’t make them think you’re about to go on a massive shopping spree.
- 🤔 Consider Creativity - Almost everyone gets a 30-year fixed mortgage, but that’s not the only option. You can get an adjustable rate mortgage, where your interest rate is fixed for 3-10 years (then it adjusts to the market rate after that), or you can even look at something like a 15-year mortgage. Both will get you lower interest rates, which saves you money! But be sure you fully understand the differences between these options, and the future effects they will have on your bottom line. You really don’t want any nasty surprises on your biggest monthly expense!
- 👍 Points And Locks - Buying points essentially exchanges your cash today for a lower interest rate throughout your loan. This could be a great option if you’re planning to stay in the home for a long time. And make sure you lock in your interest rate with your lender - this keeps a good rate in place for a period of time (usually 30-90 days) to protect you from market increases while you get everything together and finish the deal. It’s like a giant pause button for your wallet’s potential pain.
🔥Bottom line: Even with all these options for saving money on a mortgage, sometimes it still doesn’t work out in your favor. If that’s the case, don’t get yourself into a situation where you’ll be financially strapped later. You may need to pause your home search, look in a less expensive location, or look for a less expensive home.
What’s the best mortgage rate advice you’ve ever received (besides this article, of course)?
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