When you’re looking to purchase a new home or refinance your current one, the mortgage rates will play an important role, if you plan to stay in your present home for a long time, refinancing may be a cost-effective option.
If not, it will result in higher monthly payments and higher mortgage interest rates too, interest rates are changing frequently at any given point, and the available market rate for a mortgage loan may be higher than what you can qualify for with your specific financial situation and personal goals taken into consideration.
The good news is that there are many things you can do to lower the cost of your mortgage payments. Here are five effective tips to help reduce your monthly payment:
There are three main components in a mortgage that affect the interest rate you’ll pay the maximum loan amount, the term of the loan, and the interest rate.
Loan amount: This is the maximum amount you’ll be able to borrow the most common loan amount is either $417,000 or $484,000, which is referred to as the principal amount.
Interest rate: This is the amount the lender charges you each month, it’s calculated as a percentage of the loan amount.
Term: The term is the length of time you have to pay back the loan there are many loan terms available, including 30 years, 15 years, and 10 years. Most mortgages today are fixed-rate loans, which means you’re locked into paying this amount for the entire period of the loan.
Generally, the lower your interest rate is, the less money you’ll pay in interest over the life of the loan as you may already know, the rate you qualify for and the rate you end up getting are not always the same, this is because lenders have their own guidelines and underwriting process when approving a loan.
If the lender determines you have a better chance of paying off the loan by paying a certain amount, then you will end up paying this amount and if you’re aware of the current rate you’re getting and want to get a lower rate, this can be accomplished by comparing different lenders.
Alternatively, you can also ask the lender to lower your rate, some lenders will let you lock in your interest rate, which is especially helpful if you plan to stay in your home for a long time.
If you’re refinancing or looking to purchase a home and your current mortgage rate is too expensive, refinance your current mortgage and take advantage of a lower rate, a lot of times, lenders will allow you to refinance at a lower rate even if you have a good credit score, but they require that you first get pre-approved.
The good thing about getting pre-approved at scotiabank mortgage rates ontario is that you now have an idea of how much house you can purchase and how much you can afford with your monthly income, however, the downside is that you have to wait until the lender makes a decision on your application before you can move forward with a purchase.
If you get pre-approved and your current rate is still too expensive, consider lowering your monthly expenses and see if you can save some money if you can, refinance again and see what happens.