7 Ways to Lower Your Mortgage Rate | Chase (2024)

Whether it's to make more money available for home renovations now or family trips down the road, reducing your mortgage rate can be a great way to save money. Here are seven ways you may be able to lower your interest rate and reduce mortgage payments, both at signing and during your loan term.

1. Shop for mortgage rates

When looking for mortgages, be sure to contact several different lenders to get the best mortgage rate possible. Mortgage bankers, regional banks, national banks and local credit unions may all offer distinct loan products, each with their own rates and fees. Some lenders cater to new homeowners, while others are better for refinancing.

Compare your choices carefully and take your personal situation into account when choosing a lender. Even if your real estate agent gives some suggestions, do your research to make sure you’re getting the right deal for your needs. Since loan rates can change frequently, you should contact different lenders on the same day and around the same time to truly compare rates. Also factor in any associated fees when calculating the potential savings.

2. Improve your credit score

Regardless of the loan you choose, you’re likely to get a better mortgage rate if you have a higher credit score. Similar to making a bigger down payment on your mortgage, a high credit score can help you qualify for better rates and lower monthly payments.

To a lender, your credit score is indicative of your risk—the lower the score, the higher the risk. That's why lenders may charge higher interest rates to applicants with lower credit scores. If you apply for a loan and have a good credit score, you're more likely to be offered a low interest rate. However, if you already have a loan, it’s not too late to improve your credit score and qualify for better rates with a mortgage refinance.

To improve your credit score, first go over your credit report to see if you have any outstanding balances. Consider paying those and be sure to make your payments on time every month. Also look for and correct any errors on your credit report as these can negatively impact your credit. While a high credit score is ideal for mortgage approval, some affordable lending programs do accept lower credit scores.

3. Choose your loan term carefully

Short-term loans are less risky and, as a result, have lower mortgage rates. The trade-off for these kinds of loans are larger monthly payments since you're paying off the principal in a shorter time. With a longer-term loan, you spread the payments over a longer period of time, leading to lower monthly payments with a higher interest rate.

Short-term loans will generally save you more money in the long run, but long-term loans may leave you with more disposable income every month. If you're looking specifically for low mortgage interest rates and savings over the life of the loan, a short-term loan is your best bet.

4. Make a larger down payment

Simply put, the more money you put down towards your mortgage, the less you will owe on the loan. If you can make a larger down payment, you could have more equity in your home from the start. Not only will you need to repay less principal (the amount you owe on a loan excluding interest), you'll also pay less interest over the life of the loan since it is calculated on the principal owed.

While some loans have low down payment options, the ability to pay more can reduce mortgage rates and monthly payments. The smaller the down payment, the riskier lenders view your loan, and the higher the interest rate you may have to pay.

5. Buy mortgage points

If you plan on owning your home for a long time, buying mortgage points might be a clever way to save money. Paid at the time of closing, each mortgage point has a value equal to 1 percent of your mortgage. In exchange for these upfront payments, the interest rate is reduced and monthly mortgage payments are smaller. Keep in mind, however, the time it will take to recoup your savings. Known as the break-even point, this is the length of time in months it will take for your total savings to add up to the cost of the points. If this time is longer than you plan to own the home, mortgage points may not be worth it for you.

6. Lock in your mortgage rate

To potentially reduce the impact of mortgage rate changes before you close on a home loan, consider locking in your interest rate. A rate lock avoids increased rates before closing on your mortgage. You may need to pay a fee to lock in a rate, but this could be worth it if you suspect rates may change.

Keep in mind that, while a rate lock protects you from higher mortgage rates, it also rules out lower mortgage rates. Talk to your lender about rate locks with float down provisions. The float down feature gives you a one-time opportunity to lower your locked-in rate to current market rates. There may be additional fees for this option.

7. Refinance your mortgage

Renegotiating the terms of your mortgage can save you money over the loan’s course. There are a variety of refinancing options available, each with their own pros and cons. Here are some refinancing options and ways they can save you money on your mortgage rate.

  • If you're concerned about an impending increase in your adjustable-rate mortgage (ARM), consider refinancing your loan to a fixed-rate mortgage. This allows you to make consistent monthly principal and interest payments.
  • You may also be able to change your existing ARM to another ARM with different terms. The Federal Reserve Board recommends looking at ARMs with low interest-rate caps. These limits prevent your mortgage payments from increasing past a certain amount.
  • If you're in a better financial situation than you were when you first signed your loan, you could potentially negotiate your fixed-rate mortgage to a lower interest rate. This option is particularly feasible for people whose credit scores have increased or if rates have decreased. When refinancing a fixed-rate mortgage, you may also be able to renegotiate the length of your loan to better suit your needs.

There are numerous options for how to get a lower interest rate. With the various alternatives available, there’s likely a way to adjust loan payments that will work for you. Contact one of our Home Lending Advisors for assistance on how to reduce mortgage rates.

7 Ways to Lower Your Mortgage Rate | Chase (2024)

FAQs

7 Ways to Lower Your Mortgage Rate | Chase? ›

Increasing your income, paying down debts, and boosting your credit score can all help lower your risk as a borrower and qualify you for a lower mortgage rate. You can also save up for a larger down payment, as it means the lender has less cash on the line. "Mortgage pricing is all about risk," Sanford says.

How can I lower my mortgage rate? ›

Increasing your income, paying down debts, and boosting your credit score can all help lower your risk as a borrower and qualify you for a lower mortgage rate. You can also save up for a larger down payment, as it means the lender has less cash on the line. "Mortgage pricing is all about risk," Sanford says.

What will make mortgage rates go down? ›

Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the mid- to low-6% range through the end of 2024, potentially dipping into high-5% territory by early 2025.

How do you make your mortgage cheaper? ›

  1. Refinance to a lower rate. Best for: Creditworthy homeowners who could benefit from a new, lower rate. ...
  2. Lengthen your loan term. ...
  3. Recast your mortgage. ...
  4. Avoid mortgage insurance. ...
  5. Appeal your property taxes. ...
  6. Shop for cheaper homeowners insurance. ...
  7. Get a roommate.
Nov 14, 2023

How can I lower my mortgage rate without refinancing? ›

  1. Recast your mortgage. If your lender is willing, you might be able to recast your mortgage. ...
  2. Cancel mortgage insurance. ...
  3. Request mortgage forbearance or a loan modification. ...
  4. Make biweekly mortgage payments. ...
  5. Adjust your homeowners insurance or property tax. ...
  6. Bottom line.
Mar 12, 2024

Can you ask your mortgage company to lower your interest rate? ›

Yes, to some degree, mortgage interest rates are negotiable. Mortgage lenders have some flexibility when it comes to the rates they offer. However, in many cases getting a lower rate on your loan will come with a price, such as paying “points” to get a lower rate.

What can I do if my mortgage is too high? ›

The offers that appear on this site are from companies that compensate us.
  1. Refinance to lower your payment.
  2. Recast your mortgage.
  3. Eliminate your mortgage insurance.
  4. Modify your loan.
  5. Lower your taxes.
  6. Shop around for a lower homeowners insurance rate.
  7. Apply for mortgage forbearance.
Apr 10, 2024

Will interest rates ever go back to 3? ›

Sure, mortgage rates could fall to 3% at some point, but chances are that's not going to happen anytime soon. Moreover, waiting for rates to drop before you buy your home could backfire. Instead, consider buying your house now and refinancing your mortgage when rates improve.

Why are mortgage rates going so high? ›

When inflation is running high, the Fed raises those short-term rates to slow the economy and reduce pressure on prices. But higher interest rates make it more expensive for banks to borrow, so they raise their rates on consumer loans, including mortgages, to compensate.

What will mortgage rates be in 2024? ›

Mortgage giant Fannie Mae likewise raised its outlook, now expecting 30-year mortgage rates to be at 6.4 percent by the end of 2024, compared to an earlier forecast of 5.8 percent.

What happens if I pay an extra $2000 a month on my mortgage? ›

The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments.

How do I lower my escrow amount? ›

Refinance or modify your mortgage. If you can refinance your mortgage to a lower interest rate, then you can lower your overall mortgage payment — potentially offsetting a larger escrow account balance requirement. You can also use refinancing or modification as a means of extending your loan term.

What is the average mortgage payment? ›

Not only is California the state with the second-highest average rent payment, but it also boasts the highest average monthly mortgage payment, according to doxo's report. The average monthly mortgage in the West Coast state is $2,576, which is $1,174 above the national average.

What is a good interest rate on a house? ›

As of Apr. 19, 2024, the average 30-year fixed mortgage rate is 7.50%, 20-year fixed mortgage rate is 7.39%, 15-year fixed mortgage rate is 6.89%, and 10-year fixed mortgage rate is 6.79%. Average rates for other loan types include 7.31% for an FHA 30-year fixed mortgage and 7.20% for a jumbo 30-year fixed mortgage.

Does paying extra principal lower monthly payments? ›

As you may know, making extra payments on your mortgage does NOT lower your monthly payment. Additional payments to the principal just help to shorten the length of the loan (since your payment is fixed).

Can you remove escrow without refinancing? ›

You would have to refinance to a conventional loan if you wanted to remove the escrow requirement. Rules on canceling escrow accounts vary, so ask your loan servicer if you qualify. If so, you'll need to follow the rules set by the company.

How much does 1 point lower your interest rate? ›

Each mortgage discount point usually costs one percent of your total loan amount, and lowers the interest rate on your monthly payments by 0.25 percent. For example, if your mortgage is $300,000 and your interest rate is 3.5 percent, one point costs $3,000 and lowers your monthly interest to 3.25 percent.

What is considered a good mortgage rate? ›

In today's market, a good mortgage interest rate can fall in the high-6% range, depending on several factors, such as the type of mortgage, loan term, and individual financial circumstances. To understand what a favorable mortgage rate looks like for you, get quotes from a few different lenders and compare them.

Who has the cheapest mortgage rates right now? ›

Lenders with the best mortgage rates:
  • Better, 3.89%
  • Bank of America, 4.20%
  • Citibank, 4.23%
  • Amerisave, 4.33%
  • DHI Mortgage Company, 4.34%
  • PNC Bank, 4.35%
  • Home Point Financial, 4.35%
  • Navy Federal Credit Union*, 4.38%
Jul 21, 2023

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