Buying down the interest rate on your mortgage can save you tens of thousands of dollars over the life span of this loan. Weighing the monthly savings contrary to the greater final price is crucial when deciding whether the total cost of this decrease price would be worth the money to purchase it down. Lenders use discount points to buy down interest prices. Each discount point is equal to 1 percent of the loan amount. 1 discount point does not necessarily indicate the interest rate will be lowered by 1 percent, however. On a fixed-rate loan one discount point can decrease your interest rate by .25 percentage to .50 percent.
Determine how many discount points you are prepared to invest to buy off your rate. Points will increase the sum. From time to time, the purchase contract will include closing costs. Take advantage of the reduction points to be paid for by these funds. In case the loan is a refinance loan together with the funded closing costs, the new loan amount will be higher.
Request quotes from multiple lenders specifying how many discount points you would like to spend. Since each lender’s prices are distinct, the quotes may come back with varying interest prices. Compare each creditors’ interest levels against each other. Make sure each loan is of the exact same type. If you want a fixed-rate mortgage and a single lender quotes you a adjustable-rate loan, reject the quote, or require that lender provide you with a fixed-rate quote.
Telephone the lender with the 2nd lowest interest rate and try to negotiate their speed even lower without permitting them to raise your final costs. Use the quote from the lender with the cheapest quoted rate when negotiating. Call the lender with the lowest first speed and negotiate with him, too. Have both of these lenders compete for your company until you get the best possible quote.