Cut Your Mortgage Costs by Thousands with This Simple Strategy
Key Takeaways
- When looking for a mortgage, shopping around for loan options can save you thousands.
- Realtor.com found that shopping around for lenders can get you a mortgage rate 0.55% lower than average, which would save you nearly $44,000 over the life of the mortgage if you purchased a median-priced home ($425,000).
- Improving your credit score and securing a larger down payment can also help, but these steps can take more time.
At a time when mortgage rates are at multi-year highs and show few signs of coming down in the next year, shaving a few basis points off your rates can save thousands of dollars over the life of your mortgage.
Realtor.com, in a new analysis of some 2 million mortgages from 2023 and 2024, said that buyers who evaluate their mortgage lender options and shop around can reduce mortgage rates up to 0.55%. On a 30-year mortgage with 20% down on a median-priced $425,000 home, Realtor.com said that gap in rates could provide nearly $44,000 in savings over the life of a mortgage.
“After years of higher borrowing costs, even small rate improvements can open doors for more buyers,” Danielle Hale, chief economist at Realtor.com, said.
Why This Matters To You
When buying a house, it’s easy to follow a realtor’s recommendation for where to get your mortgage. However, shopping around and comparing mortgage rates can help you find the best rate and lender for your situation. The lower the rate, the more money you’ll save on the home loan.
Why and How You Should Shop Around For Mortgages
The Federal Trade Commission (FTC) also recommends getting quotes from several different mortgage lenders throughout your home buying process, and making sure you know the terms of the lender and broker you may be working with so you are prepared to negotiate.
Along with the FTC, there are several other government entities that have guides to shopping around for various rate options, like the Federal Reserve and the Consumer Financial Protection Bureau.
Credit Score, Down Payment Can Also Have Substantial Impacts on Mortgage Savings
Improving your credit score and providing a larger down payment can also help you save money on your mortgage in the long run.
Realtor.com found that lifting your credit score to the 720 to 760 range from the 660 to 720 range can net a mortgage rate that’s about 0.11% lower, about $8,700 in savings over the life of the typical 30-year mortgage.
Doubling from a 10% to a 20% down payment, on the other hand, would lead to just over $100,000 in savings with a small average improvement in the mortgage rate, as it helps minimize the amount of interest you’ll have to pay.
That said, coming up with an extra 10%—that’s $42,000 for a median-priced home—would be very difficult (if not impossible) for many home buyers today. Improving your credit and shopping around for a mortgage might be more within reach.
