When it comes to a home loan, one thing to keep in mind is the interest rate you will receive on the loan. The bank offers to loan you the amount of money you need, at a certain interest rate. This means that you pay back the original amount loaned, plus the interest. Choosing a bank with the best interest rate available is more important than you think.
Mortgage Rates Do Matter
If you receive a 30-year loan of $200,000 at a mortgage rate of 5%, after the 30 years, only making the required monthly payments, you would end up paying over $180,000 in interest on your loan. Each additional payment you make towards the principle will take years off the life of your loan. By making just one extra mortgage payment each year, and applying it to the principle, will reduce the life of your loan by 6 years, saving you thousands of dollars in interest.
The current mortgage rates being offered on mortgage loans are around 3.6% to 4.0% depending on your credit score and the amount of money you have as a down payment. Choosing the banking institution that can offer you the best mortgage interest rates can help save you money. The lower the interest rate, the less you will end up paying in the long run.
Should I Refinance?
Refinancing is exactly as the name says, financing again. When you refinance your home, you receive a new loan from the bank with a lower mortgage interest rate. Depending on the interest rate you received when you bought your home, refinancing might be a good option for you. If your home loan is an adjustable-rate mortgage, you might also consider refinancing to get a fixed-rate mortgage. This means that your interest rate will stay the same as the day you closed and not fluctuate with the change in the economy.
When deciding to refinance, the rule of thumb is, if the new interest on the loan is one percentage point lower than what your current interest rate is, refinancing will be worth it. In order to refinance, you will need to have your home appraised and apply for a new loan. You will be charged closing costs for the new loan. Consider the amount you will spend in closing costs and make sure you are planning on staying in the home long enough to earn back the money you spent in closing costs.
Talk To Many Different Lenders
When deciding on a lender for a mortgage loan or to refinance your current loan, talk to many different lenders. Finding the lowest interest rate available for your mortgage will end up saving you thousands of dollars. Mortgage rates have been at a historic low for a few years. If refinancing is an option to help you save money, take advantage of the low interest rates.
Be aware, some lenders might offer to refinance for no closing costs, but that could just mean you don’t pay the closing costs up front, instead they roll the closing costs into your loan. Read the fine print, ask questions, and make sure you know what you are getting yourself into.
Also spend time crunching the numbers and making sure the amount you will spend in closing costs and applying for a new loan will be made back in the amount you save each month on your mortgage payments.
Do Your Research
Spend some time looking over your budget, crunching numbers and looking into different lenders to find the best interest rate available for your mortgage loan. Using the charts above can help you be well informed to ensure you make the best decision and receive the best interest rate.