Believe it or not, it’s possible to save money on a mortgage, even at today’s rates.
- Today’s home buyers are spooked by rising mortgage rates.
- You may be able to save money by increasing your credit score and taking out a shorter term mortgage.
- Finding the best deal and making a large down payment can also help.
Since the end of 2020, home buyers have struggled to navigate the housing market. At the time, historically low mortgage rates caused a surge in buyer demand, as well as a significant increase in home prices.
And since the second half of 2020, the housing stock has been sorely lacking. This, too, has contributed to soaring house prices.
While it wasn’t easy to buy a home from mid-2020 to early 2022, the one thing buyers had going for them was access to competitive borrowing rates. But mortgage rates have risen sharply since the start of the year and, at this point, are the highest in more than a decade.
In fact, 40% of potential buyers said high rates are one of the reasons they’re hesitant to buy a home, according to Bank of America’s Homebuyer Insights 2022 report. But if higher borrowing rates are keeping you from becoming a homeowner, the good news is there are steps you can take to save money on a mortgage. Here’s how.
1. Boost your credit score
Mortgage lenders like to charge interest — that’s how they make money — but they don’t tend to take undue risks. And if you increase your credit score, you’ll be perceived as a less risky borrower, for which you’ll usually be rewarded with a lower interest rate on your home loan.
Now, raising your credit score isn’t usually something you can do overnight. But paying all the bills on time and chipping away at credit card balances can certainly help.
2. Opt for a 15-year mortgage
With today’s high house prices, you may not be able to afford the higher monthly payments that come with a 15-year mortgage. But if you’re looking for more interest rate savings on a home loan, reducing your borrowing window to 15 years could help you achieve that goal.
Not only do 15-year mortgages tend to have lower rates than 30-year mortgages, but you also end up paying less interest by cutting your repayment period in half. So it pays to do the math and see if a 15-year loan is an option.
When mortgage rates go up, they tend to do it all over the place. So if the average borrowing rate for a 30-year mortgage in your state is 5.9%, you probably won’t find a lender willing to underwrite a 30-year loan for you at 3.9%. But it may be possible to get a 30-year mortgage at 5.7%. And over time, that could lead to a lot of savings.
That’s why it’s important to shop around for a mortgage rather than settle for the first offer you receive. Comparing rates between lenders could help you spend less on home financing.
It’s easy to see why higher mortgage rates could drive more buyers out of the housing market. But if you’ve saved a nice down payment and are eager to buy, it’s worth seeing what steps you can take to lower your interest rate so you don’t have to put your homeownership plans on hold. the property.
The Best Mortgage Lender in Ascent in 2022
Mortgage rates are rising – and fast. But they are still relatively low by historical standards. So if you want to take advantage of rates before they get too high, you’ll want to find a lender who can help you get the best rate possible.
This is where Better Mortgage comes in.
You can get pre-approved in as little as 3 minutes, without a credit check, and lock in your rate at any time. Another plus? They do not charge origination or lender fees (which can reach 2% of the loan amount for some lenders).
Read our free review