Be Smart About Saving on Your Mortgage

Northern IL Home Search - Save Money on Your Mortgage

Homebuyers know that mortgage rates are a moving target. Over the past 18 months, they have jumped up and down as much as two points. Over time, where your mortgage rate lands can affect your total house payments by tens of thousands of dollars. However, there are ways to put yourself in the best position possible to save money both now and in the future.

The most important thing is to understand the process and the numbers that lenders throw your way. For example, the interest rate is what you pay a lender to borrow money to buy a property. If the lender wants a 6.5% interest rate for a 30-year loan on a $500,000 property, you will pay just over $3,000 per month. At 7%, you will pay about $3,300 per month.

Be prepared to shop around, it is the key to saving money on your loan. While that sounds obvious, many people don’t do it. The bottom line is that borrowers who get more quotes save more money over the life of the loan, equating to potentially hundreds of dollars every month.

While most people don’t try to negotiate their loan rate, those that do almost always get a better deal. You can’t do better if you don’t ask. It’s not just about the interest rate, there are loan processing fees as well.

Another way to get a lower mortgage rate is to “buy down” the rate by paying an upfront fee (called “points”). You would do this if you want a lower monthly payment and will own the new home long enough to recoup your upfront payment. You generally pay $1,000 to reduce a $100,000 mortgage one full interest rate point. In the current market, that $1000 buydown would save you about $60 per month.

Make sure you understand the whole process, and get quality advice from your chosen professionals. For more information about saving on your mortgage, visit today.