5 Steps to Get the Best Interest Rate on Your Home Mortgage
Interest rates are the greatest determinant of the cost of a loan. By taking the time to compare the home mortgage interest rates available from different lenders, you can make significant savings on the cost of your mortgage. There are five steps that will ensure that a borrower gets the best interest rate on their home loan*.
1) Educate yourself
The first step is understanding the different loan programs. Different lenders have different access to programs for borrowers. There are those made for commercial property investors, those for home owners looking to refinance their mortgages, for first time buyers, for rural areas and for those looking to purchase their second home. It would be helpful and much less confusing to narrow down the list by looking for home loans depending on one's situation. Otherwise, one can get lost in all the possibilities and offers without fully understanding their long term financial implication.
It would also help to make use of independent interest comparison websites. These are not biased towards any one company or kind of mortgage. They are factual and of great assistance when it comes to crunching the numbers and getting a long term view of the product one is considering going for.
2) Put down a large down payment
Interest payable is calculated on the amount owed after a deposit has been put down. A larger-than-required down payment could actually bring down the interest payable depending on how much more one pays. It would be well worth it to liquidize other assets like stock and bond investments to put down as much as possible for a deposit.
3) Look for assistance
Looking into state and federal home buyers incentive programs will also be helpful in finding the most favorable home mortgage interest rates.
The state and federal governments have put in place a number of incentives to aid the recovery of the real estate sector and to cushion buyers and investors from the sharp decline it took when global recession hit.
They are different kinds of them that are aimed at helping first time home buyers be able to buy their first home while others are aimed at helping those who wish to refinance their mortgages. There are also incentives for those buying in rural areas and their environs. Look at them and take advantage of the ones that will get a borrower the best home mortgage interest rates.
4) Rely on experts to help you understand industry terms
Understanding for instance what the Consumer Price Index is and how it affects home mortgage interest rates will be helpful in predicting whether interest rates will come down or spike and this will inform the decision to make a move or waiting things out a little.
An understanding of these terms will also guard an investor against lenders who take advantage of lenders. One way this may happen is with the misapplication of the annual percentage rate or APR which is an expression of the cost of the borrowed amount as a percentage. Lending laws mandate that the rate should be disclosed but it is often misquoted to bring it down by not including all costs as the case should be. This is done to attract borrowers with what seems to be a lower APR. Being aware of such gimmicks ensures one can tell what the real deal is.
5) Get mortgage pre-approval
You become a borrower real estate agents want to work with when you have mortgage pre-approval. This means one has a solid financial background. Getting your pre-approval will involve shopping the best rates and eventually locking in the lowest interest rate you can get. This will help you avoid a rising rate during the house hunting process.
Learn more about the home buying process with the free eBook "The Essential Guide to Buying Your First Home." The free guide covers down payments, credit scores and more. Get your copy today.
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*Comparing interest rates is a good idea. Make sure you're getting a fair rate. But also keep in mind that lenders advertising the lowest rate should also have quick closing times and be experts in your area, as well as experts in mortgage options. Sometimes you get what you pay for with rock-bottom interest rates.