Buying a home is one of the biggest investments you’ll ever make, and it’s important to know how to save money on your mortgage rate. Here are some of the best tips for saving on your home loan and reducing your overall interest cost over time:
Start a Bi-Weekly Payment Plan
Making two payments each week instead of just one can significantly reduce the amount of interest you pay on your mortgage over time. This strategy can help you pay off your loan faster and save thousands of dollars in interest. It’s important to talk with your mortgage servicer to find out if you can structure your mortgage payments this way.
Get the Lowest Rate Possible
A good rule of thumb when looking for a home is to shop around for the best mortgage rates. Using tools like Zillow Mortgage Marketplace allows you to search for the lowest interest rates available on your loan type and location. This can be especially helpful if your credit score is in the best shape and you’re considering refinancing your current mortgage.
Negotiate Your Mortgage Price
It’s a common practice for lenders to offer mortgages with teaser interest rates during the first few years of a loan. However, you should never accept the first interest rate that’s offered to you. This is because you could end up paying more in interest over the life of your loan, which can add up quickly.
Always negotiate your mortgage rate and fees when you’re shopping for a new home loan. Taking the time to do this will be well worth your while, as you’ll likely come out with a lower rate and better terms.
Save for a Large Down Payment
Another way to save on your mortgage rate is by building up a substantial down payment ahead of time. This can take several years, but it can be done if you’re willing to work at it. The extra cash you accumulate will be used to pay off your mortgage early and reduce your total debt, which can be a great financial move for your long-term financial health.
Prepay Your Mortgage
If you can afford it, prepaying your mortgage can help you reduce your debt more than any other strategy. You can use our online mortgage calculator to see how much you could save on your loan by putting even just an extra $1,000 per year toward your loan.
Raising Your Credit Prior to Applying for a Mortgage
Getting a better credit score can mean the difference between securing the lowest mortgage rate and paying more in interest. While a credit score of 620 is required to qualify for a conventional mortgage, your lender can provide you with the lowest interest rates when your score is in the higher 740s or above.
Increase Your Income
A side hustle can be a great way to earn extra money and put that cash towards your mortgage down payment, allowing you to fund your purchase quicker. This can be a great option for people who are currently renting and would like to own their home sooner.