Most people who are getting a mortgage believe the number one factor to consider is the interest rate, and rightly so. Over the average mortgage term (around thirty years) a single percentage point in interest can mean thousands of dollars more spent on the mortgage rather than going into your pocket.
The interest rate on your mortgage is all-important, so it is definitely worthwhile learning more about how interest rates work, and how you can take advantage of low interest rates. With that in mind, here are some tips that will help you get the lowest mortgage rate.
Tip #1: Bargain from a Position of Strength
If you want to negotiate the most favorable terms for your mortgage interest rate that you possibly can, it is important that you negotiate from a position of strength. With mortgage terms and conditions relying ever more heavily on risk-based assessment, getting a low interest rate is all about convincing a lender that you are a good risk.
For the most part, this means having a good credit score, stable employment, and a good income-to-debt ratio. What can you do to improve your odds?
?Get a copy of your credit report and check for errors that might lower your credit score. Take a look at this information several months before you plan to apply for mortgages to give you time to fix errors and have your credit rating adjusted accordingly. ?When you apply for a mortgage, any debt that will take longer than six months to pay off will affect your mortgage eligibility. Before taking out a mortgage reduce your long-term debt, and don't take out any loans or make large purchases until after you're approved.
Tip#2: Know the Value of your Money
Before negotiating with a mortgage lender, you should know where your money is best spent. Will you benefit more from making a large deposit, or from buying points to lock in a low interest rate? Should you get a twenty-year mortgage or a thirty-year loan?
Example: You borrow $270,000 with a $30,000 deposit at 8% interest over 20 years. Your monthly repayments will be $2,258, and you will pay $272,103 in interest.
What if you pay a $50,000 deposit? You'll borrow $250,000, for monthly repayments of $2,091 and total interest paid of $251,864. The larger deposit saves you $20,239 in interest and your monthly repayments are $167 lower. Or, let's say you reduce your mortgage to 15 years. In this case you pay $2,580 per month and pay a total of $194,447 in interest ? and you save a whopping $77,656 in interest.
Alternatively, if you reduce the interest rate on the twenty-year loan by 0.25%, you pay $2,217 per month, and save $10,038 in interest over 20 years. Amazingly, reducing your interest rate by just one quarter of a percent leads to a saving of a little over $10,000.
So what does this mean? Reducing your mortgage term is definitely the best way to reduce the amount of interest you pay over the term of your mortgage. However, to vastly improve your negotiating power, you are better off increasing the size of your down-payment. This way, you can negotiate a lower interest rate, and even a small reduction leads to big savings.
Tip #3: Buy Points and Lock in a Low Rate?Possibly
When you are in the midst of mortgage negotiations, there are a couple of optional extra steps you can take to reduce your interest rate, but remember, it is not always financially prudent to do so. Every case is different, so do not assume these steps are inherently beneficial.
?If your lender offers points (most do) you can purchase points to reduce your mortgage interest rate. This can be a very good way of saving money over your mortgage term, but it is extremely important to do the math and make sure you are saving more in interest than you spend on points. ?If you feel confident (and knowledgeable) enough, you can try to lock in a low interest rate. This means your lender agrees to lock in your interest rate at a rate you agree upon, until your mortgage is processed. If interest rates rise, you get to keep the lower rate, but you are still locked into the higher rate if they fall.
Tip #4: Get Pre-approved
What does pre-approval have to do with getting a lower interest rate? Simple, if you get the mortgage before you go looking for a house, time is not an issue, and you can negotiate at your leisure. If you wait till you have found the house of your dreams, you are going to feel pressured to get that mortgage ASAP, and that leaves you in a poor bargaining position.
The discounted travel rates offered through the internet are substantially lower than those offered by licensed sales agent on the ground at airports and through travel agencies throughout cities. Most of the rates on air travel are lower if the traveler is able to travel at the last minute, but some have found it cheaper to travel by planning ahead. Discounted travel rates are not available for all destinations, but the fun places are where travel bargains can be found every day.
Some travelers prefer to search for discounted travel offerings to exotic places for a once in a lifetime travel plan. The discounted rates on hotels, air fare and some forms of entertainment will save many families enough money to travel to other places throughout the world several times a year. Families use the discounted fares exclusively and might never travel at full price because the internet fulfills the need to travel at discount and travelers do not need to look any further.
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Some airlines have blackout dates for travel during holiday periods but will honor the coupons issued by travel organizations year round. Those organizations funnel a large portion of the yearly revenues and the discounted fares are expected. The airlines will typically accommodate any traveler with club memberships with discounted prices on rental cars and lodging if they know a coupon code that can be entered at the time the travel is booked on an internet travel site.
Travels find discounted travel rates through the banking institutions that sponsor a certain brand of credit card. Travelers can pay full price or a discounted one at the gate, but receive money back when they get their credit card statement. Waiting for discounted travel rates such as this does not fit in well with many peoples style of travel. This type of travel offer is an incentive only and is welcomed by people who have no other travel discounted opportunities.
Since discounted travel rates are available along many avenues of travel, people know to ask for discounts on anything travel related. One would expect discounts for automobiles when traveling but one would never think to look for opportunities for free gas. Some credit card companies provide travelers with incentives to earn free gas if they use their brand of credit card while traveling. Other items purchased in the service station count toward the points needed to earn the free gasoline.
Some people book travel and receive points just for accessing booking agents through a discounted travel representative's site. Discounted travel rates can be found for hotels and some of the discounted rates qualify travelers for free lodging for the night. Those perks are expected by all travelers and the travel industry tries to accommodate travelers by keeping prices low enough to enjoy other forms of entertainment in every city that they travel to.
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