 MINIMIZE
YOUR MORTGAGE COSTS
Strategies For Shaving Down Your Interest Rate
It makes sense to shop for interest rates when looking for a home mortgage.
Just a half point drop in rate can save hundreds of dollars a year and thousands
of dollars over the life of a loan.
Compare, for example, the difference between 7.5% and 7.0% on a $100,000
mortgage over 30 years. Although the monthly payment is just $33 lower with
the 7.0% loan, the annual cost is $393 lower. If you held the loan for the
full 30 years, you would save an impressive $11,805 in interest expense!
Interested in getting a larger loan?
A lower rate can help there too. For nearly the same monthly payment, a
30-year 7.0% loan would finance $105,000 compared with $100,000 at 7.5%.
Interest rates can vary considerably from one lender to another, and one
loan type to another. Be sure to work with a reputable lender and to choose
a loan program that meets your financial needs.
Here are some other ways you may be able to cut your mortgage interest rate:
Lock A Great Rate
Does it look like rates are going up? Lock in today's best rate early and
for as long as possible.
Float Down
Some loan programs allow you to lock a rate, but then lower your rate if
interest rates drop before settlement. There may be a fee associated with
the privilege, however.
Close Quick
Some lenders will agree to lower your interest rate slightly if you can
settle quickly, say within 30 days. It pays to ask!
Pay Points
By paying some interest up-front in the form of discount points, you can
get a lower fixed-rate mortgage. Be sure, however, you'll keep the mortgage
long enough to justify the cost of the points.
Settle In
You may be able to get a lower rate by agreeing to keep your loan for five
years or longer. The lender may charge a penalty (around 1%), though, if
you do move or refinance earlier.
Pick An ARM
Although the interest rate and payment on your loan will fluctuate over
time, ARMs often start out a couple of points lower than fixed rates. Depending
on the program, the first adjustment may occur 1, 3 or 5 years from loan
inception, then yearly thereafter. |
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