How to Lower Mortgage Interest

Negotiating a lower mortgage interest rate saves you money on the home loan throughout the life of the mortgage term. Acquiring a better rate increases your spending power and you may qualify for a more expensive home. Interest is essentially compensation or a fee paid to mortgage lenders; low interest rates result in lower monthly payments. For this reason, buyers like yourself are often willing to do anything to secure the best rate possible.

• 1

  Check your credit rating before looking for a mortgage. Visit MyFico.com and request a copy of your credit score. Good ratings justify better mortgage loan rates. Raise your score to 680 or higher by paying bills on time and paying off unsecured debts.

• 2

  Put down a higher down payment to negotiate a lower interest rate. Down payments carry weight when applying for a mortgage. Mortgage loans require at least a 5 percent down payment, but higher payments may persuade a lender to reduce the rate on the mortgage. Dip into your cash savings, retirement fund or use money from the sale of a property as down payment for your new home.

• 3

  Pay points and lock in your rate. Pay for an interest rate reduction by paying discount points to your lender. Each discount point costs about one percent of the mortgage balance and drops the rate on the home loan by 0.25 percent. Talk to you lender about locking the loan rate for a period to avoid rate fluctuations.

• 4

  Take your time when looking for a home loan and compare loan rates with different lenders to get the lowest mortgage rate. Use a local broker to research lenders, or check out online websites such as LendingTree.com.