The Mortgage Interest Rate Really Does Matter

A Home Buying Article Contributed by Elizabeth Fox-Wise

Everyone Wants to Find the Best Mortgage Rate When Purchasing a Home

Your mortgage rate is perhaps the most important of all interest rates on loans and other debts. Because your home is probably the most expensive thing you will ever purchase; it stands to reason that your mortgage is the largest debt you will ever carry.

The interest rate that you have to pay on your mortgage loan will not only effect the size of your monthly payments, but will also have a big effect on the total money that is spent over the life of the mortgage, which translates to the total amount that you paid for your house.

A Mortgage Rate That Varies Only Two Percent Can Have a Big Impact on House Cost.

When you carry your mortgage to full term, the mortgage rate can have a significant impact on the total cost of your home. Even a difference of two percent can realize you a total savings of tens or even hundreds of thousands of dollar. To make this more clear, let's take a look at an example.

Say that you take a $135,000 mortgage with an eight percent mortgage rate and a term of thirty years. If you carry the mortgage for the full term, you will have paid $222,000 in interest alone. Add that to the original mortgage amount of $135,000 and your house will have actually cost you $357,000.

Now let's look at the same $135,000 mortgage taken with a six percent mortgage rate and the same thirty year term. At full term of mortgage, you will have paid only $156,000 in interest for a combined cost on house of $291,000.

And finally, if you are lucky enough to get that same $135,000 mortgage at a four percent mortgage rate. After thirty years of paying, interest costs would have been $97,000 with a combined total of $232,000.

While $232,000 is still quite a bit more than the house purchase price of $135,000, no one would argue that it is much better than $357,000. Clearly this demonstrates that the Mortgage Interest Rate really does make a difference and that it is worth shopping for the best rate you can get.

Ways to Secure a Lower Mortgage Interest Rate

There are several things you can do to help your chances of getting the best mortgage interest rate available to you. Obviously the first one is to spend some time rate comparing. Get rate offers from several different lending institutions before deciding which is the best mortgage for you.

Another option is to choose a mortgage offer which will allow you to pay more points at the time of closing in order to secure a lower mortgage rate.

And a third factor is be flexible on your mortgage terms; considered a variable rate mortgage if the starting interest rate is low enough. Consider a shorter or longer term mortgage to get a better rate.

And finally, polish your financial details and credit rating to make yourself an attractive candidate to lenders. Lending Institutions will often offer their best rates to their best customers.