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How to Save Thousands with a Lower Interest Rate Mortgage
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Purchasing a home is the largest investment most people make in their entire lives. In a purchase involving hundreds of thousands of dollars – or even millions – the smallest elements make large financial differences. One of the most important factors in purchasing a home is negotiating a competitive interest rate, and you can literally save hundreds of thousands of dollars by finding a lower interest rate mortgage.
Even ½ a percentage lower interest rate mortgage saves you tens of thousands
A .50% difference in mortgage’s interest rate can translate to a variation of tens of thousands of dollars. For example, when you purchase a home for $200,000 with a 30 year mortgage holding an interest rate of 5.75%, your monthly payment is $1,167.15. With an interest rate of only half a percent lower, a lower interest rate mortgage of 5.25% yields a monthly payment of $1,104.41. Over the course of 30 years, that is a $22,500 difference!
Clearly, the terms and interest rate of your mortgage play a significant role in determining how much money you will pay in the long-term for your home. Whereas your total payments for a 15 year mortgage fixed at an interest rate of 5.875% will amount to $527,673, the same home would cost you $777,031 in a 30 year fixed mortgage at 6.25%. That is a difference of nearly $250,000 on the same exact home!
With that said, comparing your lower interest rate mortgage options through a service like Quicken Home Loans can literally save your family hundreds of thousands of dollars. Taking a few minutes now to compare and shop around on your loans will pay off significantly in the long run.
How to find a lower interest rate mortgage
With planning and a small amount of effort, you can quickly find a lower interest rate mortgage. Remember, whether you are a first-time homebuyer or an owner looking to refinance, mortgages are like any other retail product – you can negotiate the price and terms.
The key to finding a lower interest rate mortgage is to shop around and compare between the difference lending institutions. Whereas this process used to demand considerable time and energy, www.LendingTree.com has streamlined the process. All you have to do is submit your inquiry, and Quicken Home Loans delivers the competitive lower interest rate mortgages right to your phone, email, or mailbox.
Whether you choose Quicken Home Loans or conduct research on your own, you should compare your options between different institutions to find a lower interest rate mortgage:
Thrift institutions
Commercial banks
Mortgage companies
Credit unions
Every lender will present its own terms and conditions, and when you shop around with a service like Quicken Home Loans, you can compare to find the best lower interest rate mortgage for your dream home.
Evaluate all of the lower interest rate mortgage details
Obtaining a home mortgage involves a significant amount of fine print – and each detail plays a critical role in how much your long-term costs are for your home. When you are negotiating your lower rate mortgage, make sure you evaluate the following points between different lenders:
Interest rates: Clearly, the most important fine print of your mortgage is the interest rate. There are several considerations when it comes to your interest rates.
Current rates: Ask your lender for its current mortgage interest rates, clarifying whether your quoted value is the lowest daily or weekly rate.
Fixed or adjustable: With the variable mortgage crisis facing America, this demonstrates the importance of choosing between a fixed or adjustable interest rate mortgages. Keep in mind that should interest rates rise, your monthly payments with a variable interest rate mortgage will increase as well.
APR: The Annual Percentage Rate incorporates the interest rate, points, credit charges, and broker fees you will pay each year. This provides you with the comprehensive overview of your annual financial charges. Even though it may appear that you have a lower interest rate mortgage, these extraneous fees can quickly add to the burden of your monthly payments.
Points: The points that you pay to the lender are in addition to the interest rate. Essentially, points are the “fee” you pay the lender to obtain the lower interest rate mortgage. When you are analyzing points, you can ask what the dollar value is – which makes it easier to compare different mortgage options.
Fees: Even a lower interest rate mortgage comes with many different fees, such as broker fees, settlement / transaction / closing costs, and underwriting fees. It is important for you to obtain an estimation of the fees, as these are generally negotiable between lenders.
Private Mortgage Insurance & Down Payments: For most lenders, if you do not place a down payment of 20% on your mortgage, you must purchase private mortgage insurance (PMI). If a PMI is required on your lower interest rate mortgage, then you should inquire as to the cost of the insurance, and how much your exact monthly payment will be inclusive of the PMI.
How to negotiate for a lower interest rate mortgage
Keep in mind that all mortgage terms are subject to negotiation, especially if you have good credit. Two borrowers may have identical loan qualifications, but one can walk away with a lower interest rate mortgage – all because of negotiation.
When you receive a mortgage quote, there generally is an overage built into the price. The overage is essentially your leeway, which gives you room to negotiate. There are several steps you should take in the negotiation process to obtain a lower interest rate mortgage:
Ask the lender to write out all of the loan’s costs.
Inquire whether the lender can waive some of the fees, lower the interest rate, or charge lesser points. Make sure that the lender is not increasing one financial term while lowering another.
Ask whether the lender can give you better terms than the original quote or lower interest rate mortgage from another lender.
Once the negotiation terms have been finalized, obtain a lock-in letter from the lender. This letter will include the specific interest rate, the number of points, and how long the lock-in is valid. Keep in mind that you may pay a small fee for the lock-in, which is generally refundable once you close on the home.
Utilizing a free comparison service such as Quicken Home Loans saves you time, money, and hassle – as they encourage the lenders to automatically compete to provide you with the best lower interest rate mortgage offer. Indeed, the key is to have banks and lenders compete to earn your business – which saves you hundreds of thousands of dollars with a lower interest rate mortgage.
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