How to Save Money on Your Mortgage
As a homeowner, your mortgage interest rate determines not only the size of your monthly mortgage payment, but also the total amount you'll pay over the lifetime of the loan.
Securing a mortgage at the best interest rate possible can save you hundreds of dollars a month and tens of thousands of dollars over the years.
For example, a 30-year-mortgage for $300,000 with a 3.00% fixed interest rate results in an estimated monthly payment of $1,264; over the life of the loan, principal and interest payments will total $455,332, according to Experian, a consumer credit reporting company.
If the interest rate for the same mortgage is 5.00%, your monthly payments will increase by more than 25%, to $1,610, and over the lifetime of the loan, you'd pay $579,767 in principal and interest.
"The reality is that much of the rate determination process is driven by policies from Freddie Mac (the Federal Home Loan Mortgage) and Fannie Mae (the Federal National Mortgage Association), so there is not a lot of room for negotiating lower rates," says John Cunnison, chief investment officer at Baker Boyer Bank in Walla Walla, Washington. "But there is some."
