When most people think about getting a lower mortgage payment, they look primarily at the amount of the mortgage, and at the time frame of the loan. But there's another factor that will significantly affect both your monthly payments and your total interest bill: The interest rate. Knowing what to look for in your rates can help you get a lower one, which will save you a ton of money.
Here are a few places to start.
Stay Away from Adjustable-Rate Mortgages
Although adjustable-rate mortgages, or ARMs, generally start off with a great rate it isn't locked. If you're starting now when mortgage rates are pretty low, getting an ARM pretty much guarantees your rate and payments will go up in the future. To keep your interest rate low over the life of your loan, stick with a fixed-rate mortgage.
Consider a Shorter Mortgage
Although spreading your mortgage out over a longer time will certainly make for lower monthly payments, there's a lot to be said for shorter mortgages. Most banks reduce the interest rates on shorter mortgages, which can save you a ton of money over time. While 30-year and 15-year mortgages are standard, some mortgage companies like will also offer terms for 10-year mortgages.
Up Your Down Payment
Banks are always in favor of reducing their potential risks. Since a higher down payment decreases the risk of the bank losing money on a loan, most will reduce the interest rate as the down payment increases. This has another benefit, too. A higher down payment means you won't have to pay mortgage insurance, which can tack hundreds of dollars onto your monthly payment.
Don't Be Afraid to Negotiate
Most people know they can haggle over a used car or a futon at a garage sale, but for some reason, a loan is often accepted as a take-it-or-leave-it proposition. Not true: Loans are a commodity, and banks are often willing to deal. Before settling on a lender, ask each potential mortgage company for a good faith estimate. This will tell you in detail the costs you'll incur at closing, as well as your interest rate and any other fees and terms. In many cases, you can reduce the interest rate by paying an upfront fee, and you can sometimes even get certain items waived entirely if you go directly to the loan officer.
When it's time to get a new mortgage or refinance your existing one, view it like any other purchase. With a little research and the willingness to ask questions and strike a bargain, you can make sure you're getting the best possible deal on your new loan.
About the author: Special mortgages for veterans, like those offered by Mann Mortgage will sometimes have lower rates to stay competitive. Keep this in mind as you go through the home buying process. For more information contact Brooke via Twitter @BrookeChaplan.