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How to reduce your mortgage interest rate?

On an average, the mortgage rates are 4.19% for 30 years and 3.23% for 15 year loan. Though it is the historically low interest rate that is seen by the Australians, the interest rate can be even reduced. Even if your interest rate goes down, a little, you would be saving a lot more money, which can be used to pay off your loan.

Why does it matter?

Even a small decrease in the interest rate can be very profitable. The payment of 4.1% and 4.2% interest rate would be just $12 difference, but, it would come up to $4,200 over the whole loan period.

Better credit score

It is a known fact that the interest rate for a person with higher credit score than another who has a lower interest rate than the latter. Any individual with a credit score more than 620 can get a mortgage. The interest rate of such mortgage would be 5.39%. For those with a credit score of more than 750 would have an interest rate of 3.8.

Shop and negotiate

Do not accept the offer of the first bank, which provides you a mortgage. Shop around and get at least three quotes to compare the rates. There are many websites that help you to compare between two banks. As stated above, even a small variation in the interest rate would mean a lot in terms of payment.

So do not be lazy to shop around. You can also negotiate the rates and get a better rate. If the bank considers you as a risk free customer, it would come down by a few points in the interest rate to retain you.

Points

There are a few options where the interest rate would be reduced if the borrower pays an amount of money, upfront. Whether to choose the mortgage with points depends upon how long you are planning to stay. For a 30 year loan, if you are planning to stay for more than 11 and a half years, it is better to opt for the mortgage with one point.

There are hundreds of lenders who are looking out for a customer. Do not be obliged to accept the first loan offer. Shop around and choose a better rate. Every dollar you save on the interest rate can be used to pay off the principle. Talk to the agents or the representative to know about the mortgage rates and other related fees. Low interest rates with high fees for processing would not make a big difference.