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Lower Your Mortgage Interest Rate

Lower Your Mortgage Interest Rate

Lower mortgage interest rate — that’s what any homebuyer wants, right? And with the Fed’s recent interest rate hikes, which are an attempt to lower inflation, many prospective home buyers are asking the question, “How can I pay the lowest interest rate on a house?” Well, good news: we’ve got a few insights and strategies that we can share from our recent client activity and home transactions.

Lower Interest Rates

What is the current mortgage interest rate?

The first step in determining how to lower your interest mortgage rate is to know the current rate. A resource for knowing the current interest rate is to visit mortgage news, there are several charts and tools available with up-to-date information per loan duration.

What is today’s interest rate on home loans?

As of September 29, the mortgage interest rates are at their highest since 2007.

The 30-year-fixed mortgage rate is 6.82%


How Can You Lower Your Mortgage Interest Rates?

For our home-buying clients, we currently recommend three strategies to lower your mortgage interest rates.

  1. Rather than a traditional bank, consider using a wholesale lender for your mortgage. Wholesale lenders can often save you a half to a full percentage point off the current rate by shopping around various lenders.
  2. Consider an adjustable-rate mortgage (ARM), rather than a fixed rate mortgage. Typically, an ARM is lower for the first period of the loan than a fixed rate mortgage. As we like to say, “Date the rate —Marry the House!” Most industry experts expect lower rates in the next 1-2 years once inflation is under control, allowing people to refinance.
  3. Pay down the rate with an upfront fee. If that doesn’t sound appealing, consider it as a negotiation tactic with the home sellers. You can request that the sellers buy down your interest rate at closing. This is not a small bargaining chip, as sellers can pay tens of thousands of dollars to bring your interest rate down a couple percentage points. However, it does get their home sold in this topsy-turvy market, and you get a better rate. Win-win!

Is it smart to buy-down the interest rate?

We’d like to say, “Absolutely! Everyone should always buy-down their interest rate!” however, it wouldn’t be responsible for us to make that bold of a claim.

Here’s what we can say: If you, prospective home buyer, buy down your interest rate at close, you essentially lower your mortgage rate at the outset of your home purchase. That means you will pay less interest over the life of your loan. Sounds great, right? Yes, if you have the extra money to put towards the interest rate buy-down or if you successfully negotiated for the sellers to buy-down your loan, this is a smart financial move.

However, if your sellers did not buy down your loan, and you do not have the extra cash on-hand at close, or you simply need that money for something else, you have decisions to make regarding what is the best use of your financial resources — and it very well may be something other than buying down your interest rate. Talk with a mortgage advisor about your situation and see what works best for your situation.

Will interest rates go down again?

What goes up must go down, but when? The rate increases were an attempt by the Federal Reserve to curb inflation, but only time will tell whether their monetary policies will be successful.

“The Fed’s rate hikes are designed to cool demand, and in the housing market, that means culling out buyers who, until just a few months ago, were vying for a handful of houses, sending prices to record highs. Fed officials hope that their policies can slow down the housing market without spurring a crash altogether.”

Washington Post

The idea then, is that the higher interest rates will slow the house transactions and eventually bring home prices down to a more sustainable level, and then they will lower mortgage rates as well. However, there is currently a low inventory of homes compared to demand across the country and here in Central Oregon. So how long it takes for the market to correct, inflation to drop, and the Fed to reduce rates is unknown, though some experts are predicting at least six months.

Help is here

If you want to buy a home in the next six months, and all this interest rate talk is making you dizzy, reach out to our team. We can get you set up for success and share our local housing market knowledge and experience with you.

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