Ways to Reduce Your Mortgage Rate

November 7, 2022

If you are looking for ways to make your new home as affordable as possible, you can find plenty of ways to reduce your mortgage rate that few might know about. Here are some options below.

Adjustable Rate Mortgages

Adjustable rate mortgages are fixed for an initial period of time and then adjust with the market rates over additional periods. For instance, you can lock your initial rate in for periods that might include 5, 7, 10, and 15 years. The initial rate can be 1 to 2 percent less than prevailing interest rates. Then, there are future adjustment periods that tie to a market index in which your rate can increase or decrease. The strategy is that in the interim you can refinance if and when rates decrease. This strategy can produce a considerable reduction on your monthly house payment.

Interest Rate Temporary Buydowns

Buydown programs take the current prevailing interest rate and buy it down in the early years.  For instance, a 2-1 buydown takes today’s rate and reduces it by 2 percent in the first year, then 1 percent in the second year, and then years 3-30 continue at the prevailing rate. In some instances, sellers participate in the cost of the buy down programs which provide reduced house payments in the early years.

Homeowner Grants and Programs

You can find multiple homeowner grants and programs funded by local, state, and federal governments and by nationwide foundations. They especially cater to first-time homebuyers or those with lower credit scores. Grants allow people to buy a house for doing a public good: owning a home. Programs make housing more affordable through loaned down payments, discounts for public service workers, and more.  

Mortgage Insurance Removal

Mortgage insurance typically applies to homeowners who take on a conventional or USDA mortgage loan or who offer a down payment of less than 20%. It is a cost in addition to your monthly payments that protects the lender from the risk of lending to you. You can both get a discount on your mortgage rate and get rid of private mortgage insurance (PMI) by requesting PMI cancellation at a specific home equity milestone or through a program. There are also strategies to reduce or eliminate the mortgage interest right from the start.

Home Construction Loans

Would you like to build a new construction home? Most people would. You don’t have to forfeit this desire because of high interest rates; home construction loans allow people building their own home to lock in their interest rate at today’s rate while your home is under construction.  In a rising interest rate environment, you can lock in today’s rate saving a considerable amount in the event or rising rates.  Additionally, in certain circumstances you can stay in your current home until their new house is move-in ready eliminating the need to move twice.

A Home Builder with Your Budget in Mind

Researching all your options in detail will help you reduce your mortgage rate in the smartest way possible. Instead of doing all the research by yourself, you can work with a home builder that has your budget in mind. Ameri-Star Homes is eager to help you get the best deal possible and reduce your mortgage rate in Maryland.

Let Ameri-Star Homes Build Your New Custom Home!

Ameri-Star Homes was built on the idea that a home is not complete until the homeowner is 100% satisfied. That’s right, completely satisfied homeowners. Whether you want a home built on one of our home sites or on your own land, count on the same high quality from Ameri-Star. We have set out to exceed all your expectations of integrity, affordability, and customer satisfaction. Build lasting memories for years to come with Ameri-Star Homes. 

For more information, contact us today at 410-590-1000 or through our contact page. For more helpful custom home tips, keep in touch with us through Facebook, Twitter, LinkedIn, and Pinterest!