How to Get the Lowest Mortgage Rate?

How to Get the Lowest Mortgage Rate?

Are you planning on buying a house soon? Before you go house hunting, it pays to look for the lowest mortgage rate. A low mortgage rate can save you thousands of dollars over the life of your loan, plus it can reduce your monthly repayments. So there’s plenty of reasons why homeowners should try to obtain the lowest mortgage rate.

Here are some tips to get the lowest mortgage rate:

Tip #1 Strengthen your credit score

Your lender will examine your credit score when you apply for a mortgage. A good credit score is helpful for getting a low mortgage rate. See if you have a healthy credit score. The higher your score is, the better the terms you can get. A range of online providers will tell you your credit score.  If you have a bad credit score, there are still ways you can improve it, such as avoiding new debts, paying off your loans on time, and not making too many credit enquiries.

Tip #2 Increase your deposit

Putting down a large deposit up front can be difficult to accomplish but if you can accumulate 20% of the value of the property or more, you will save money. You won’t be charged for the Lender’s Mortgage Insurance, you’ll have more initial equity in the house, and you will often pay a lower interest rate.

Tip #3 Compare mortgage rates

When shopping around for mortgages, you will need to compare rates to see who offers the most competitive deal in the market. The best way to compare rates is by looking at the comparison rates instead of the headline rates. The comparison rate gives you a more realistic price for your mortgage that includes fees.

Tip #4 Use a mortgage calculator

This type of calculator is useful when you compare mortgage rates, not just from different lenders but also when comparing the different products that one lender offers. A mortgage calculator lets you see what your repayments will be, based upon your loan amount, term, and interest rate. Our mortgage calculator lets you compare two loans so you can easily see the differences.

Tip #5 Don’t forget to ask about the fees

A low mortgage rate may seem really attractive, but you should also take note of the fees involved. Fees can accumulate and can drive up the overall cost of your loan. So check how much the additional costs and upfront fees are including application fees, settlement fees, and closing costs to see if you’re actually getting a good mortgage deal.

Tip #6 Consider the nature of mortgage you want

The nature of your mortgage will also be an important factor determining the cost of your loan. Typically, there are two type of mortgages you can choose from, one is a variable rate loan, and the other is a fixed rate loan.

  • A variable rate loan is a type of mortgage where your interest can change at your lender's discretion. Changes are often based upon changes to the Reserve Bank of Australia's official cash rate or changes in the cost of wholesale funding on international markets. A key benefit of a variable rate loan is that you can make extra repayments and add mortgage features like an redraw offset facility. But the downside is that it exposes the homeowner to the risk of increasing interest rates.
  • A fixed rate loan is a type of mortgage where your interest rate stays the same for an agreed period. This protects you when interest rates on other products increase. It means you know how much your repayments will be for up to five years which is great for budgeting. The main downside of a fixed rate loan is that you won't enjoy the benefit if your lender decreases the interest rate. 

Shopping for the best mortgage shouldn’t only be about the interest rate. It is also important to factor in the associated costs, fees and customer service. Also, consider the different types and features of the mortgages available so you get the best deal for your situation.   

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