Do You Want to Lower Your Mortgage Interest Rate?
2 Minute Read
Getting a lower interest rate on your home loan can save you a lot of money. On any given day there are a variety of factors that can impact your interest rate such as your loan type, loan term, credit score, and much more. But how do you get a lower interest rate on your mortgage, and how do you know if you should refinance your mortgage?
Here are 3 different ways you can lower your interest rate on your home loan.
1. Shorten Your Loan Term:
Usually taking out a 15-year mortgage instead of a 30-year home loan yields a lower interest rate, plus you’ll end up paying less interest over the life of the mortgage. This will help you save money and build wealth. This is a great option for homeowners looking for debt-free homeownership.
2. Switch Your Loan Type:
- Move from an FHA to a Conventional Loan: If you’re a first-time homeowner your current mortgage may be with the FHA. Typically, conventional loan programs have lower interest rates compared to FHA loans. Not to mention paying premiums for mortgage insurance and other costs are common with this type of loan. As home values continue to rise, it may be a good time for you to look at switching from your FHA loan to a conventional loan program.
- Move from an Adjustable Rate Mortgage (ARM) to a Conventional Loan: If you currently have an adjustable rate mortgage or balloon-type loan and you’re looking to switch to a fixed-rate loan, a conventional loan might also be right for you. With ARM loans you have an interest rate that changes over time which causes your monthly mortgage payment to fluctuate based on what’s going on in the market (not your individual financial situation). For example, a 5-year ARM loan will have a fixed-rate for the first 5 years and then the rate will fluctuate from the 6th year onward.
3. Take the Time to Understand Your Credit Score:
If you’re buying a new house or refinancing your current home, you need to know the importance of your credit score. Those who are focused on debt-free homeownership are often working hard to get their credit score down to zero and may want to refinance with a no score loan. Others may be looking to repair their bad credit and want to focus on getting their credit score higher to qualify for lower interest rate loans. Either way, we’ve got your back and can help you make sense of what score will help you get the best interest rate possible for your situation.
If you’re interested in testing out how different interest rates can affect your overall home loan, check out our mortgage calculators.