High Mortgage Rates? No Problem! 3 Easy Tips to Save Big on Your Home Loan

Financial Hacks: How to Save on Mortgages in a High-Interest Climate

Sep 23, 2023 - 10:23
Sep 23, 2023 - 10:23
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High Mortgage Rates? No Problem! 3 Easy Tips to Save Big on Your Home Loan
3 Easy Tips to Save Big on Your Home Loan

In today's dynamic real estate landscape, potential homebuyers face the formidable challenge of navigating soaring mortgage rates, which have recently eclipsed the 7% mark. However, there's hope on the horizon. Through strategic financial maneuvers, it's possible to not only weather this high-interest environment but also secure substantial savings on a mortgage.

Elevate Your Credit Score: Pave the Way for Favorable Rates

A robust credit score not only serves as a testament to financial reliability but also opens doors to more advantageous lending terms. Lenders perceive a strong credit history as a sign of a dependable borrower, potentially resulting in lower mortgage rates. While an instantaneous improvement is improbable, committing several months to enhancing your score can yield noteworthy benefits.

Of all the factors influencing your FICO® Score, payment history commands the most weight, accounting for a significant 35%. Consistently meeting financial obligations establishes a positive history, albeit over time. Furthermore, reducing revolving credit card debt can give your score a much-needed boost. Decreasing the amount of credit utilized concurrently also plays a pivotal role.

Finally, conduct a thorough review of your credit report for any inaccuracies. Rectifying errors, such as an erroneously reported delinquent debt, can lead to a considerable increase in your score.

Comparison Shop Among Lenders: Unearth Hidden Gems

Much like the meticulous property search process, it's equally crucial to scrutinize offers from different mortgage lenders. Soliciting estimates from at least three lenders ensures an informed decision. A competitive rate from one lender could translate into substantial savings.

Beyond interest rates, be sure to carefully examine closing costs, a critical component in finalizing a home loan. While one lender may offer a lower rate, they may offset it with higher closing fees. Thorough attention to detail is key before finalizing your choice.

Consider a Shorter-Term Loan: Trading Monthly Relief for Long-Term Savings

While 30-year mortgages often entice with lower monthly payments, a 15-year loan can offer a significantly lower interest rate. As of the current market assessment, Freddie Mac reports an average 15-year mortgage rate of 6.52%, compared to the 7.12% on 30-year mortgages.

Though monthly payments are higher with a shorter-term loan, the long-term savings are substantial. For example, a 30-year loan at 7.12% on a $200,000 loan amounts to $284,642 in interest. In contrast, a 15-year loan at 6.52% totals $113,916 in interest.

While today's mortgage rates may seem daunting, strategic financial decisions can lead to substantial savings. Additionally, keep in mind that when rates eventually drop, refinancing remains a viable option, potentially securing a more favorable interest rate down the line.

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Also Read: Warning: Mortgage Rates May Hit 8% as Home Sales Disappoint

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