Saving Money When You Buy Or Refinance A Home

Now is the time for anyone considering refinancing an existing mortgage or financing the purchase of a new home to take advantage of historically low interest rates. Each day brings headlines warning homeowners and buyers to act quickly before rates inevitably start trending upward. Our advice to borrowers is to slow down because all offers of a low-interest rate are not the same.

The financing professionals at MortgageDepot, a mortgage broker company offering commercial and residential financing options, want borrowers to save money and know that focusing only on interest rates could be a mistake. Here are a few tips we put together to help borrowers save money when financing a purchase or refinancing an existing loan.

Shop to maximize savings

The rate offered by a lender may be its lowest, but it may not be the lowest interest rate available in the marketplace. As a mortgage broker, we work with several lenders to obtain the best terms available for our borrowers.

Credit scores affect interest rates

Borrowers with high credit scores get the lowest rates on mortgages. We advised borrowers who may not qualify for the lowest rates to take the following steps to improve their credit scores:

• Make payments on time.
• Reduce outstanding balances.
• Avoid adding additional debt.

Depending upon the eligibility guidelines of a particular lender, even a slight increase in a borrower’s credit score could significantly lower the cost of financing.

Increase the down payment

Borrowers may be able to improve the rate of interest offered to finance a new home by increasing the size of a down payment. Even if it does not change the interest rate, putting more money down may help borrowers avoid the added expense of mortgage insurance.

Paying points to save money

Being told to pay interest upfront, which is really what a borrower does by paying points, may not appear to be a way to save money, but it could be as long as a borrower is smart about doing it. Reducing the interest rate by paying points at closing only makes sense if a borrower intends to keep the property long enough to recoup the upfront charge through the monthly savings of a lower rate of interest.

Consider all the options

Lenders offer an assortment of financing programs from which borrowers may choose. A 15-year mortgage usually offers a lower interest rate than a 30-year loan. Some programs offer lower interest rates to first-time homebuyers.

Saving money with a second mortgage

Some lenders offer borrowers who are short on the cash needed for a down payment the opportunity to avoid mortgage insurance with a piggyback or second mortgage. A second mortgage reduces the loan-to-value ratio on the first loan to avoid the added cost of mortgage insurance.

Accelerate repayment

The actual amount of a monthly mortgage payment that goes toward interest is calculated based upon the outstanding principal balance. Making extra payments toward principal reduces it quicker and results in less interest charged over the life of the loan.

Talk to the experts

We recommend that borrowers arrange for a consultation with one of our loan officers to learn how to save money when buying or refinancing residential or commercial property.

Contact one of our loan consultants to get more information.