Most of the prospective home buyers seek lowest mortgage interest rates to finance their dream home. There are several things that can contribute to lowering the interest rate on your mortgage. Many of these involve projecting you as a low risk borrower with a low likelihood of any kind of default. In addition, it is also important to compare the offerings from multiple lenders to ensure that you are going for the best deal available in the market.
Projecting a Low Risk Profile to Get Good Rates
Banks and other lending institutions seek to minimize their risk on every mortgage. They lure low risk customers with low interest rates, while they offer higher interest rates to cover their risk of lending to high risk borrowers. Several factors play an important role in getting low mortgage interest rates. Some of the important ones are:
- Good Credit History: Lenders review your credit history to assess your lending and credit repayment patterns. If you have a significant amount of existing debt or if you have defaulted on credit payments in the past, it is likely that the mortgage interest rates offered to you would be higher. Even though you cannot do much about your credit history on a short notice, you should try to minimize your outstanding debts before applying for a mortgage. The lower your outstanding debts, the lower would be the interest rates offered to you.
- Stable employment history: It is easier to get good mortgage rates if your employment history displays stability and your current employment is not temporary. Additionally,
if your debt to income ratio is low, it projects you as a safe borrower and it can be instrumental in getting you low mortgage interest rates.
- House Deposit and Home Equity: Committing to paying a bigger house deposit or having significant home equity also helps in getting lower interest rates, as both of these factors lead to lower risk for the lender.
Conduct Thorough Research and Compare Offers
Different lenders have different risk assessing mechanisms and thus offer different mortgage interest rates depending on their business strategy. Therefore, it makes sense for you to seek information from multiple lenders and carefully compare the mortgage products offered. Like many other products, the first offer is not always the best, and you should try to negotiate the deal offered to you.
There are a few other things too that you should keep in mind. The cheapest mortgage rates do not always mean the cheapest mortgage loans. Many low rate products come with unfavorable preconditions such as a hefty prepayment penalty, which can prevent you from seeking a better deal like refinancing your mortgage at a later stage. Such mortgage deals can also come with long repayment durations, which can often mean that you end up paying more money to the lender in the long run.
Since there are many conditions and different types of costs associated with a mortgage loan, it is a good idea to seek help from a professional mortgage broker who can make the process of getting the lowest mortgage interest rates much easier for you.