SPRING, Texas – We don’t have to tell you that the prices of just about everything seem to be going up. We want to save you and your family money by reducing your monthly mortgage payment. The key to saving money might be to look at the role interest rates play.
To put it simply, an interest rate is what we pay to borrow money. He can go up and down, depends on many thingsbut knowing it can save you big, especially on one of the most expensive things you’ve ever bought – your home.
“I have a large family, I have seven children and my parents are moving in with us,” Spring’s mom Rachel Gucker said.
Rachel Gucker and her family are shopping for a house. Remax Realtor Natalie Chaline Fox guide her through the process. She admits it’s not always easy.
“It’s very stressful. People are overwhelmed,” Fox said.
While finding the perfect kitchen or the best yard is the fun part, talking about loan interest rates is often overlooked.
“A house is the biggest purchase anyone will make and as far as home equity goes, probably the least sought after,” Fox said.
“An interest rate looks like another detail that could become overwhelming overall,” Gucker admitted.
Knowing Interest Rates Can Help You Save Money
University of Houston Economics teacher Dr. Christopher Clarke uses creative social media videos to explain things like supply and demand and interest rates. He has won awards for the creative way 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 considering buying a home or refinancing, now is a good time.
“Thirty-year mortgage interest rates were the lowest they’ve ever been,” he said. “We are probably seeing a slight increase in all interest rates in the economy. But I want to emphasize that what we are forecasting for next year is slightly above the historically low interest rates we have now, we are not looking at exorbitant interest rates at all.
Shop for a loan with the lowest interest rate
Finding that lower rate means you have to shop around.
“A lot of lenders will compete with each other and they will compete for the interest rate to be slightly lower. So another offer,” Dr Clarke said. “Changing your interest rate by half a percentage point can reduce your mortgage payment by hundreds of dollars a month.”
“Each lender will have different interest rates and it’s best to talk to several,” Fox said.
Refinance your current loan. There will be fees that come with refinancing your loan, so you need to weigh the options and see if the numbers work for you.
“The trade-off with refinancing, because you have to pay significant fees, depending on the bank and depending on the deal they’re offering you, so refinancing isn’t free,” says Dr. Clarke. “So there’s this cost-benefit trade-off between the fees I’m paying today and all the money I’m saving by having a lower interest payment over the life of my loan.”
Consider changing your home insurance plan. Insurance is also something that is often added to your overall mortgage bill. Shopping every year and finding the best rates could have a big impact on how much you pay each month. Every small gesture adds up.
Pay on principal. If you get extra money, like a tax return, make a payment on your principal. This will go directly towards your loan balance. A few of these payments over time can shorten the term of your loan.
This mortgage payment calculator by Dave Ramsey can help you understand how it works.
“There are so many decisions you make in the process,” Gucker said.
“It’s absolutely about saving money,” Fox said.
There is also government programs to help get you a lower interest rate without having perfect credit.
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