Getting The Lowest Mortgage Rate

It seems more often than not borrowers that are looking to purchase or refinance in the Fort Lauderdale and South Florida area “shop around” for the lowest rate because that’s what everyone tells them to do.

As I have mentioned time and time again, your interest rate is not the most important thing when getting a mortgage but at the end of the day many will fixate on this.  The Wall Street Journal reported a few weeks ago about how the interest rates people see are 64 basis points (.64%) lower than what they end up getting.

There is another great article from Amy Hoak’s, “Why you can’t get the lowest mortgage rate,” that does a great job explaining it too.   It’s interesting we are beginning to see more and more of these articles.  Could it be because so many people get taken advantage, hmmm?

You’re not paying points

Average rates in Freddie Mac’s survey include average discount points paid for the mortgage. But not everyone is willing to pay points.

For the week ending Oct. 27, rates on the 30-year fixed-rate mortgage averaged 4.1%, but that rate required an average 0.8 point to get it. A point is 1% of the mortgage amount, charged as prepaid interest. Read more: Rates on 30-year mortgage slide to 4.1%.

Unless you’re going to live in your home for a very long time, paying points often doesn’t make sense, said Greg McBride, senior financial analyst for Bankrate.com.

“Where the investment pays off is if this is a loan you’re going to have for a long period of time. You’re making an investment of money now to pay the points to get the benefit of a lower monthly payment for years to come,” he said. “The more years you have of that lower monthly payment, the greater return on that initial investment of points.”