SPRING, Texas – We don’t have to tell you that the prices for just about everything seem to be going up. We want to save you and your family money by lowering your monthly mortgage payment. The key to saving money might be looking into the role interest rates play.
To put it simply, an interest rate is what we pay in order to borrow money. It can go up and down, depending on a lot of things, but knowing about it can save you big, especially on one of the most expensive things you will ever buy - your home.
“I have a large family, I have seven kids and my parents are moving in with us,” said Spring mom Rachel Gucker.
Rachel Gucker and her family are shopping for a home. ReMax Realtor Natalie Chaline Fox is walking her through the process. She admits it’s not always easy.
“It’s very stressful. People get overwhelmed,” said Fox.
While looking for the perfect kitchen or best yard is the fun part, talking interest rates for the loan often gets overlooked.
“A home is the biggest purchase someone will make and as far as the home loan goes, probably the least shopped for,” said Fox.
“An interest rate sounds like another detail that could become overwhelming in the big picture,” admitted Gucker.
Knowing about interest rates can help you save money
University of Houston Economics Professor Dr. Christopher Clarke uses creative social media videos to explain things like supply and demand and interest rates. He’s won awards for the creative ways he uses video to teach his students.
“How do you keep the attention of 600 students in a purely online class?” said Dr. Clarke.
Dr. Clarke said if you are going to buy a home or refinance, now is a good time.
“Thirty-year mortgage interest rates have been the lowest they’ve ever been,” he explained. “We probably see some uptick in all interest rates in the economy. But I want to emphasize what we’re forecasting in this next year is slightly above the historically low interest rates we have now we’re not looking at sky-high interest rates at all.”
Shop around for a loan with the lowest interest rate
Finding that lower rate means you need to shop around.
“A lot of lenders will compete with each other and they’ll compete the interest rate to be slightly less. So another offer,” said Dr. Clarke. “Changing your interest rate by half a percentage point can lower your mortgage payment by hundreds of dollars a month.”
“Every lender will have different interest rates and it’s best to talk to several,” said Fox.
- Refinance your current loan. There will be fees that go along with refinancing your loan, so you need to weigh the options and see if the numbers work for you.
“The trade-off with refinancing as you have to pay significant fees, depending on the bank and depending on the deal they give you so that refinancing doesn’t come free,” explains Dr. Clarke. “So there’s this cost benefit exchange between the fees I pay today versus all the money I save by having a lower interest payment for the duration of my loan.”
- Protest your appraisal and reduce your property taxes. While property taxes don’t have a direct impact on interest rates, this is often an expense that is rolled into your monthly mortgage payment. (Here is a story we did explaining how to protest your property appraisal and lower your taxes.)
- Consider changing your homeowner insurance plan. Insurance is also something that is often added to your overall mortgage bill. Shopping around each year and finding the best rates could have a big impact on how much you pay each month. Every little bit adds up.
- Try changing your payments. Ask your lender if you qualify for a home loan modification. Sometimes, banks and lenders will work with you to help if you run into financial hardships. You may also be able to recast your loan. It’s a lot easier than refinancing. You can read about that here.
- Pay on the principal. If you get extra money, like from a tax return, make a payment on your principal. This will go directly towards your loan balance. A few of these payments over time may shorten your loan period.
This mortgage payment calculator by Dave Ramsey can help you figure out how this works.
“There are so many decisions you are making in the process,” said Gucker.
“It’s absolutely all about saving money,” said Fox.
There are also government programs to help get you a lower interest rate without having perfect credit.