When it comes to buying a home, one of the most important factors to consider is the interest rate on your mortgage. Getting the best interest rate can save you thousands of dollars over the life of your loan. Here are some tips to help you secure the best rate:
Improve your credit score: Lenders use your credit score to determine your interest rate. A higher score usually results in a lower rate, so make sure to pay your bills on time and keep your credit utilization low.
Decrease debt-to-income: A simple way to get a better mortgage rate is to decrease your debt-service ratio. Canadian lenders use this to assess your risk level. You can do this by paying larger amounts on your debts, or by raising your household income.
Increase your income stability: Lenders like to see that you are financial stable and secure for the long term. Avoid impulse purchases, work some extra hours, or work freelance on the side. And make sure you have your work history compiled as lenders like to see a good, solid history of employment.
Shop around: Don't settle for the first mortgage offer you receive. Compare rates from multiple lenders to ensure you're getting the best deal. A realtor can also help you find competitive rates.
Consider a shorter loan term: While a 30-year mortgage may have lower monthly payments, a 15-year mortgage typically comes with a lower interest rate. This can save you a significant amount of money in interest over time.
Save more money and make a larger down payment: Putting more money down upfront can lower your interest rate and reduce the amount of interest you pay over the life of the loan. You tend to get a better rate if you put down over 20% tan you do with only a 5% down payment. And it’s also a good idea to have 3 or 4 months worth of mortgage payments tucked away in your savings as a cash reserve - lenders likes to see that you have payments covered in case of any unforeseen circumstances.
Consider an adjustable-rate mortgage: If you don't plan on staying in your home for a long time, an adjustable-rate mortgage (ARM) may offer a lower initial rate than a fixed-rate mortgage. Just make sure you understand how the rate can fluctuate over time.
By following these tips, you can increase your chances of getting the best interest rate on your mortgage and save money in the long run. If you're a first-time buyer or new to the real estate market, don't hesitate to ask your mortgage broker any questions you may have about the mortgage process. I work with some great mortgage professionals that can help you every step of the way. With the right guidance and experience, you can make informed decisions when it comes to buying or selling homes.
