Mortgage rates vary based upon the rates set by the Federal Reserve. If your current rate is higher than new rates set by the Federal Reserve, you have the option of refinancing or negotiating a new rate. In order to reduce your current mortgage interest rates, you must find out what options are actually available and whether or not there are any closing costs involved. In most cases lower interest rates will save you money, but it all depends on how long you can refinance under the lower rate.
Reducing Current Mortgage Interest Rates
Mortgages come in two main forms. A fixed rate mortgage allows you to take advantage of a set rate for a fixed duration. If the term isn’t the entire length of the mortgage, you are able to negotiate a new interest rate at the end of each term. Many people choose a fixed rate mortgage when refinancing to lock in lower rates instead of continuing with an adjustable rate mortgage.
Adjustable rates mean the rates change as the Federal Reserve rates change. This allows you to take advantage of lower rates without refinancing, but you can also end up with higher rates depending on the economy. When refinancing for a reduced rate, some lenders only allow you to take advantage of lower rates if you choose adjustable rates. This option is usually only beneficial for short-term home ownerships.
You can also reduce interest rates if your lender offers breaks for automatic payments. Since the lender knows they will be paid on time each month, they are willing to lower your interest rate. This can apply at any time during your mortgage.
In order to reduce your current mortgage interest rates, you must first contact your lender. Ask about reduced interest with automatic payments and any other special offers that don’t require refinancing. If the rate isn’t low enough or can’t be lowered any other way, ask about refinancing your mortgage. When refinancing, you don’t have to go with the original lender. Some lenders offer discounted rates if you refinance with them. You will be responsible for any closing costs on your original mortgage. Check to see if there are closing costs and if the new lender will pay them. High closing costs may cause it not to be worth refinancing if it is for a short-term mortgage.
Benefits of Rate Reductions
Over the course of just five years you can save hundreds when you reduce your current mortgage interest rates. Your payments will likely be less and over the course of a long-term mortgage you will save thousands. With lower rates the number of payments and loan term may actually decrease, allowing you to pay off your mortgage faster.
If you refinance with a fixed rate mortgage, you can lock in a lower rate now and keep it even if the rate increases a few months later. This offers the perfect opportunity to change from an adjustable rate to a fixed rate to ensure your rate stays low.