Mortgage interest rates have risen rapidly in recent months having a significant impact on monthly housing costs. With inflation numbers still high, it’s uncertain when mortgage rates will stop their climb. Here are tips that may reduce your mortgage rate and help ease the home-buying or refinancing process.
 

Lock in your rate. If you’re not quite ready to buy a house in the next month or two, you may be able to lock in an interest rate. Keep in mind the lender may charge an extra fee or include the cost of the rate lock in the loan.

Consider buying discount points. Discount points are a form of prepaid interest that you can pay upfront to knock down your loan’s interest rate. With Credit Human, each point costs 1% of the loan amount and typically cuts your interest rate by .120 of a percentage point. Consider using a mortgage payment calculator to get an idea of how long it would take or you to recoup the upfront cost through the savings on your monthly payment.  

Make a larger down-payment. Down payments act as a risk mitigation tool for lenders. A larger down payment means that you don’t need to borrow as much and your monthly payment will be lower, both of which reduce the chances of your defaulting on your payments. Consider a loan that doesn’t require private mortgage insurance (PMI) like the Slack Builder loan. The premium for PMI can cost between 0.5% and 1% of your loan amount on an annual basis, so eliminating it could cut your costs considerably.

Consider an adjustable mortgage rate. Adjustable mortgage rates (ARM) carry some risks in the long run, but they typically offer an upfront fixed-rate period which can lasts between three and 10 years that you can take advantage of immediately. If you go this route though, you’ll want to plan to refinance your loan before the fixed period rate ends, especially if interest rates have dropped by then. Otherwise, your costs may end up increasing.

Focus on improving your credit score. You can get approved for a mortgage loan if your credit score is at least 620, but lenders will reserve their best rates for borrowers with credit scores in the mid-to-upper 700s or higher. If you are a Credit Human member, you can see your credit score for free through the Credit Human digital banking app.

Opt for a shorter repayment period. Mortgage lenders typically offer lower interest rates to borrowers who commit to a loan less than 30 years because the shorter term means the lender recoups their investment faster. Reference your spending plan to determine if you can afford the higher monthly payment that comes with a shorter term. Be sure to consider inflation and everyday expenses and how they might evolve over the course of your loan years before committing to a higher payment.

Your home is an important investment. From buying a home for the first time to improving your home, or even leveraging your home’s value, our knowledgeable loan advisers will work with you every step of the way. Explore our home loan options and contact us at 844-468-9369 to speak with our lending team today.