Though there are several ways to adjust your interest rate after you have already started paying off a loan, the simplest and most effective ways to ensure a low rate are by having good credit and providing a healthy down payment. Regardless of your pre-approved loan amount, raising your down payment can lower your principal and remove PMI costs that can add a significant sum to your monthly payment.
But if your mortgage is already in process, there are still a few steps you can take to reduce your interest.
- Pay down your principal. For many homeowners, the thought of paying tens of thousands in interest over the lifetime of a loan can seem daunting. But if you’re ever in a position to do so, making additional or higher monthly payments will help you pay off your mortgage quicker, lowering the overall amount you pay in interest. Additionally, it helps you build more equity in your home, which is always a good thing!
- Get rid of PMI. Private mortgage insurance is meant to protect your lender from risk in the event that you default on your loan, and it can add a considerable amount to your mortgage payments. Making extra or larger-than-required payments will help you reach the 20% threshold necessary to do away with mortgage insurance. You might also be able to pay for all your PMI at once as a large lump sum, which will likely lower your interest.
- Try to refi. If your credit has improved or the Fed has recently lowered rates, it’s probably worth talking to your NOVA Loan Officer to explore your refinancing options. While NOVA is always looking for ways to help our borrowers save money, you can be on the lookout as well, monitoring Fed rates and trying to improve your overall credit.
- Adjust your term. If you’re simply hoping to increase the amount of money in your pocket each month, you could consider extending the term of your loan. For instance, if you currently have a 15-year loan, moving into a 30-year term will reduce your monthly payments. While it might not lower your overall interest rate, this will allow you to have extra cash from month to month.
If you’ve already worked with NOVA, reach out to your Loan Officer anytime to discuss your options, as the housing market changes every day! If you’ve never worked with us before, we’d be happy to help; ask us whether now’s the right time to refinance!