Many homeowners know to shop around for mortgages and to compare more than just the interest rate before selecting a lender, but even these borrowers may end up with a monthly mortgage payment that is higher than it could be. While smart borrowers will save money, they can save even more by following these tips:
- Don’t immediately discount an adjustable-rate mortgage (ARM). While those with ARMs did pay a steep price when the housing market crashed, today, with a more stable market, an adjustable mortgage can save homeowners a considerable amount of money. That’s because these loans generally have a fairly small interest rate to start with, while fixed-rate mortgages are generally higher because the lender knows they will never be able to raise them. ARMs may not necessarily change, either.
- Consider a broker. A mortgage broker can often find options that a homebuyer may not even know of, much less be able to find. Brokers usually have years of experience in the mortgage industry and have made a number of contacts with lenders. As independent agents with no affiliation to any bank or other financial institution, brokers can also give homebuyers impartial advice.
- Buy discount points. While it may add to the upfront cost, buying discount points reduces the interest rate on the mortgage, saving homebuyers money in the long run. While not all buyers may have the finances to do so, buying points can lead to a substantial savings over the lifetime of the loan.