How to Get a Better Mortgage Rate?Chad Madill - The Clean Boot - Monday, 07 July 2019
Buying your own home is one of the biggest, and most exiting, challenges you will ever face in your life. It comes with huge financial responsibility, and if you’re not informed on your available financing options, you could end up seriously mismanaging your money.
The first step in controlling your home ownership costs begin with your home loan (or mortgage) and the interest rate associated to that loan. The lower the interest rate, the less cost you’ll have to pay over the amortization period. Here are 8 useful tips you can follow to get a better home mortgage.
- High Credit Score
The interest rate of a loan generally depends on your credit score. The better your credit score, the lower the rate you can get on your mortgage. Lenders generally consider your credit score as a yardstick to measure your creditworthiness. A low score could direct lenders to ask for a hefty mortgage rate.
- Show Consistent Proof of Income
Apart from maintaining a good credit score, it’s also important to keep a long-tenured work history. If you have a proven track record of working at a business and have evidence your annual income, it demonstrates you are dependable. Lenders will be more likely to loan you money and provide better interest rates.
On the other hand, if you have changed jobs multiple times, lenders might show reluctance to lend you money. Generally, all financial institutions and credit unions will check your past and current employment history. This is to see whether you’ll be able to afford to payback your loan.
- Do Your Research
This is certainly one of the most important steps. Make sure to check the entire market and shop around for the best possible home loan deals with the lowest possible rates. Luckily, there are different ways you can compare mortgage rates. For instance, there are numerous online banking websites that can help you collate and compare rates offered by national banks and credit unions. Make sure to check out various credit unions as they tend to offer lower rates than conventional banks. Also, these unions are usually happy to work with clients that have a lower credit rating.
- Ask Your Financial Institution to Offer a Better Rate
Although, it may sound weird to many, you can even ask your bank to lower their rate if you have a great credit score. Lenders are generally interested in lending money to those who have credible credit scores, as it means that they can pay back their loan in full and have lower risk of defaulting. So, why not give this a try?
- Get Rid of a “Jumbo” Loan Category
One of the most important things you should consider is the amount of money you intend to borrow, as there is more risk involved with “jumbo” loans. Banks and credit unions may ask for high interest rate to curtail their risk.
Borrowers can take advantage by putting more money down on expensive properties. Reducing your home loan money can get you out of the “jumbo” loan category, which can obviously save you lots of money.
- Opt for a Short-Term Loan
Another smart way to reduce your rate of interest is to shorten the payback period for your loan. Generally, consumers pick loans with 30-year payback periods. However, banks and credit unions incentivize borrowers who repay their loan in a relatively shorter span.
For example, instead of sticking to the 30-years figure, you can select 10, 15 or 20 years duration to repay your mortgage. Obviously, this will impact the overall cost of your monthly installments.
- Refinance Your Current Loans
For those looking to reduce their monthly loan payments, you should consider a refinancing option. Interest rates are still close to their maximum lows, which means that borrowers who pay over 100 basis points can benefit from a refinancing option.
- Never Delay Your Payments
The role of technology (internet/mobile banking) in the world of personal finance is crucial. Make sure to check the list of features to confirm whether or not your bank or lender is offering this service. Establishing an automatic loan payment schedule that makes sure you’re never late in paying your installments. This can increase your credibility with your bank and can result in lower interest rate offers when you renegotiate your mortgage renewal.
If you’re serious about getting the best offer and a great home mortgage, make sure to follow all the recommendations listed above – particularly researching different available options for the best interest rate. Fortunately, you don’t have to physically visit different lenders and financial institutions to compare offers. There are hundreds of online banks and lending solutions available at the click of a button that make comparisons easier, all from the comfort of your home.
There you have it. Follow these 8 basic steps and get the best mortgage to make your dreams a reality.