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3 Steps to Finding the Best Mortgage Rates

Many real estate experts agree - the average interest on a home mortgage can end up costing you nearly twice the price of the mortgage itself. Just remember that the best deals are usually reserved for homeowners planning to stay in their home for several years.

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While finding the best interest rate out there remains a priority, make sure to look at several other factors. These three steps to finding the best mortgage rates could help you lock in a better deal.

  1. Do the Math, Know All Costs
    The traditional rule of thumb is to refinance your mortgage if you can shave at least two percentage points off of the mortgage rate. While it's a good place to start, don't forget to calculate the costs involved in a refinance, including fees, closing costs and additional points.
  2. A better approach: Figure out how much the new rate can save you each month and compare that to the costs involved with the refinance. If you can save $250 every month with a lower interest rate but it costs you $6,000 to refinance your loan, it will take you two years to save an amount equal to the money you had to pay up front. So do the math; math is your friend.

  3. Shop for Shortest Term (that Fits Your Budget)
    Loans come in varying lengths -- generally 15, 20 or 30 years. Look for the loan with the shortest term that fits your budget. If you want to borrow $100,000 at 7% interest, you will pay $75,000 less in interest if you opt for a 15-year mortgage rather than a 30-year term.
  4. A word of caution: Just be sure you can afford the extra money each month that a shorter term will cost - there's no use saving money in the long run if it breaks your budget right now.

  5. Find Lowest Rate & Fewest Points
    The key to lowering your mortgage payments every month is to find the lender with the lowest interest rates combined with the fewest points to pay up front. In case you're wondering, points are the fees you pay at the time of closing to reduce the loan's interest rate. One point equals 1% of the loan value.

On the 15-year loan from the earlier example, changing the interest rate by just 0.5% will save you more than $5,000 over the life of the loan. Each point on that $100,000 you borrowed will cost you an additional $1,000.

In the end, it pays to shop around for the mortgage deal that fits your needs and your budget. Shopping online with a free service like can save you time and money as reputable lenders compete for your business. Refinance and start saving money before your next mortgage payment is due!

Disclaimer: The information on this website and from any communication related to this website is for informational and entertainment purposes only. The material on and related to this website does not constitute advice and should not be relied upon. You should not rely on any material on this website to make (or refrain from making) any decision or take (or refrain from taking) any action. Consult your tax professional for investment and tax advice.

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