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Everything You Should Know About Mortgage Rates

Everything You Should Know About Mortgage Rates

lower your mortgage rates

lower your mortgage rates

We all want the lowest rate possible on our mortgage, right?! It would be nice to have extra money to spend on food, clothing, your brand new truck, and so on. You may feel like most of your income is coming in one door, and immediately heading out the other. However, there are many options out there to help lower your mortgage rate to keep more money in your bank account, considering mortgage rates will be increasing…

How do you get a better mortgage rate?

Before you start looking to buy a house, make sure you have all your finances in order to ensure you can get pre-approved for a mortgage and get the best mortgage rates possible. Work with a mortgage broker so they can advise you on which options you should be looking at besides finding you the best rates, and don’t forget that working with a mortgage broker is free. You will need to work on your mortgage application whether you are a first-time homebuyer, or looking to refinance your existing mortgage. Reviewing the details of your credit score, making sure you don’t take out any other loans while you’re applying for a mortgage, keeping a steady budget, and balance in your bank account while avoiding those pesky credit cards isn’t always easy.

  1. Improve your credit score

Your credit score is one of the main things that your mortgage lender will review. This helps them determine if you have the financial stability to pay back the loan, and what interest rate you will pay. The higher the credit score you have, the lower your mortgage rates will be. The credit score you want to aim for is 750 or higher. If you want to improve your credit score, start paying down and eliminating any outstanding debts or loans. Make sure you make your payments on time and clean up any errors on your credit report.

  1. Hold steady employment and have a solid income history

Lenders prefer that you have a steady employment history to ensure you will be able to pay your mortgage on time. If you are self-employed, check out my article about how to improve your mortgage application here. 

  1. Lower your debt-to-income ratio

Your debt-to-income ratio is the difference between how much you owe and how much income you make. Your lenders will review this to make sure you can take on the mortgage loan. If it’s over 43%, you will most likely not get approved for a mortgage. The lower the better.

  1. Save a larger down payment

The higher your down payment, the more likely it is that you’ll get a good mortgage rate. Depending on the value of the property, you will need to come up with a 5%-20% down payment. If you can set aside more than that, it might be seen as a positive sign that you are very responsible when it comes to money.

Know that you can refinance your mortgage rates

Your mortgage will be renewed about every 5 years or so. During this time, you can refinance your mortgage for a lower rate with your existing lender if rates go down, or you can shop around for better mortgage options. Only do so though for really good reasons. There is often a penalty fee you pay for breaking your current mortgage so you will want to make sure you stand to gain more than that financially if you are going to refinance. The long and short of it all is that there is a huge difference when it comes to a mortgage rate of 2.25 and 2.50 on a million-dollar home. Working with an experienced mortgage broker like myself will help you find the best deals, and I can advise you on what to work on in terms of your mortgage application to lower your rates too. To learn more about refinancing a mortgage check out this article.

Know that there are fixed and variable mortgage rates

Fixed mortgage rates stay the same the entire term. That means you will pay the same amount every month for the length of your mortgage term. This could be ideal to avoid possible interest rate increases during your term… especially in the uncertainty of the world today.

The pros of a fixed mortgage rate:

  • Can easily be budgeted;
  • It will not change if lender’s rates go up and down;
  • Ideal if you value peace of mind.

The cons of a fixed mortgage rate:

  • It may not be worth it if there is a big difference between fixed and variable rates;
  • You may be paying extra for the stability;
  • You risk missing out on a rate drop.

A variable mortgage rate can increase or decrease monthly during your term. It varies with changes in the market, so it’s ideal if you want to save money when interest rates are low. You’ll want to watch the fluctuation closely though so that you can lock into a fixed rate if necessary.

The pros of a variable mortgage rate:

  • Proven to be less expensive over time in the right market;
  • You will pay less if the interest rate drops.

The cons of a variable mortgage rate:

  • Future rate increases are uncertain;
  • The uncertainty may negatively affect your finances.

Mortgage rates will be going up, so it’s best to work with a mortgage broker now to discuss if a fixed mortgage rate or variable mortgage rate is best for you. To learn more about different types of mortgages, give this article a read here.

Remember: Working with a mortgage broker to help you find the best mortgage rates possible is FREE!

Mortgage brokers get paid by the mortgage provider, so my job is to find you the best mortgage rate, to help you navigate your options and to help you save money — All without charging you a nickel for it. When it comes to navigating the crazy world of mortgages, I am your guide. As a reputable mortgage broker and financial advisor in Barrie, Ontario, I can help you find the best mortgage rates possible while ensuring you are thinking through all your options to make an informed decision. To learn more about renegotiating your mortgage rate, refinancing your mortgage to find the money for renovations or creating a plan to buy your first home, contact me today at 705-315-0516, and let’s set up a meeting to talk about your plans and how I can help you secure the mortgage you need.

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