Mortgage rates can vary significantly based on several factors such as your credit score, the lender of choice, and the loan tenure. Getting a low rate mortgage can help you save on interest throughout the course of the loan tenure and can make your monthly repayments slightly easy on the pocket. Here are our tips to help you qualify for a mortgage with a low-interest rate:
Have a consistent income and work history: If you have a stable work history and a consistent income that has been growing annually, you are more likely to be offered a lower rate. If you are a freelancer, ensure that you’ve at least had your income in order for the past 2 years, if not more.
Check your credit score: Your credit score has a significant impact on the interest rate that you will be quoted. So, before approaching a lender, ensure that you’ve checked your credit score. If you find that you have a low credit score, it is wise to improve your credit score and then apply for a mortgage.
Improve your debt-to-income ratio: Reducing your debt-to-income ratio, which is a big part of your credit score, can help you secure a low rate mortgage. Ensure that you start working on reducing your debt-to-income ratio before you begin actively looking for a home to purchase.
Shop around: Once you start approaching lenders, you’ll realize that the rate offered can vary substantially from lender to lender. This is why it is a good idea to “shop around” and compare rates quoted by different lenders. You can do this using an online aggregator by keying in some basic details like your location, type of house, income, price range, etc.
Ask for a lower rate: Lenders want your business, especially if you have a good credit score and a steady income. Given this, if you find that a lender’s mortgage rate is not particularly attractive, you can choose to directly approach them and ask for a lower rate. If they really want you to sign the papers, they will likely come down on the interest rate.
Opt for a shorter loan tenure: Choosing a shorter loan tenure can help you secure a lower mortgage rate and help you repay your loan quickly. However, keep in mind that shortening the tenure of your loan will increase your monthly payments.
Make a larger down payment: Lenders consider those who make larger down payments less likely to default on their monthly payments. So, if you have some money in savings, you can consider making a larger down payment.
Pay for points: Points are a certain fee that is paid by a homeowner to the lender to lower the mortgage rate. Typically, one point is equal to 1% of the loan’s total value. This is a great move if you are looking to retain the house that you will be purchasing for several years.
It is worth taking at least a few steps to try lowering your mortgage rate. Even a small change to the rate you are quoted can help you save substantially in the long run!