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5 Tips for a Lower Interest Rate on Your First Loan

Traditionally, home loans have always had some of the lowest interest rates simply because they are secured with a property. However, due to the growing home prices, the principal amounts become ever bigger. As a result, the loans become more expensive and the monthly instalments get higher. That is why you need to use as many strategies as possible to secure a lower mortgage rate. Check out some of the most effective ones.

1. Comparison Shopping

The competition between lenders is constantly growing so they are trying to offer lower mortgage rates. By comparing different home loans, you will be able to pick the one with the lowest rate. Even if you manage to secure a rate which is lower by just 0.01 percentage points, you will save money. If you do not have the time to shop around or you fear that you may get things wrong, you can use the services of a professional mortgage broker.

2. Negotiation

Each and every lender is open to negotiation and you should use this to your advantage. Your bank may be able to offer a lower interest rate in order to keep you as a customer. Another bank may come up with attractive mortgage offer if you open and current account with them. You will be in the best position to negotiate a lower rate if you have exemplary credit record and a large deposit. Check the mortgage market situation as well. If the demand for home loans is low, you will have greater bargaining power.

3. Bigger Deposit

The deposit is your contribution to the payment of the sales price of the property. The bigger it is the smaller the loan principal will be. A smaller principal amount lowers the risk for the lender even further. That is why they will be willing to lower the mortgage rate.

4. Floating Interest Rate

This rate is always lower than the fixed one on any type of mortgage. That way, it can save you money. At the same time, since it is floating, it can go up or down within certain limits. This means that you have to provide for bigger monthly payments. Still, you will have the option of switching to a fixed-rate loan and the opportunity to pay off the loan early without penalty.

5. Shorter Loan Term

These mortgages always come with lower interest rate and help you save. However, due to the shorter term, the monthly instalments are considerably higher. You have to ensure that you will be able to afford them.

You can readily combine these strategies for getting one of the most affordable home loans.

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