Welcome back!
I’ll be answering everyone’s top question today which is… how can I get the lowest rate?!
Now pay attention… there are two parts to this:
- COMMON KNOWLEDGE ITEMS
- improve your credit score: a higher credit score signals less risk and can help you secure a better loan
- shop around: compare rates from different lenders, or better yet… get someone to do it for you (a trusted mortgage broker)
- shorten loan time: not to be confused with TERM of mortgage. A shorter amortization may mean lower rates
- lock in your rate: if you think rates will increase, it’s better to lock in your rate now
- UNCOMMON KNOWLEDGE ITEMS
- put LESS down payment: when you put less down payment (less than 20% to be exact), your loan automatically becomes insured where YOU pay the insurance premium usually 12-18k in your loan! This insurance is for the lender so of course your rates will be better; they are secured and you paid for it. I typicaly don’t suggest this route unless you don’t have the 20% down, then it’s better to put less down and just get into the market.
- adjustable rate vs variable rate: to get a lower rate, you want to make your payments fluctuate with the rate instead of a fixed payment with variable mortgage. When your payments change, you are guaranteeing the pay down the scheduled amount of principal which means the risk is less for the lender but you’ll need to ask yourself.. can you handle increased payments?!
- choosing a less popular term: it’s the end of 2023 and we are seeing a huge increase in clients choosing 2/3yr fixed rate terms as the expectation is that rates will decrease in a few years. During rate increases, the 2 and 3 year terms increased with more bps than the other
So that all being said… lowest rate may not necessarily be the BEST choice for you as it requires someone who is highly risk tolerant.
What will you be looking for in your mortgage?