Mortgage Interest – Should You Care?

Mortgage interest is a big expense for American families. It is so big in fact that over 30 years you repay the bank a little over double the amount you originally borrowed. I suggest choosing your mortgage wisely.

 

Click here to buy this piggy bank and put the money you save on mortgage interest inside.
Every dollar you save on mortgage interest is a dollar that goes in your pocket.

What This Blog Is About

This blog is going to reveal my six finest techniques of negotiating a good deal on your mortgage and saving a fortune on mortgage interest. You don’t have to pay me for the information. Most of it is outlined in paragraphs to follow.

My techniques work for purchase mortgages and refinance mortgages. The method is very powerful and it will work on just about any loan. However, it is tailored for residential mortgages (excluding reverse mortgages) because residential mortgages are unique in the way you shop them.

How You Will Save a Fortune on Mortgage Interest

By using my ATOMIC Method of Mortgage Savings, you will be able to achieve one of the following or a combination of:

• Saving money on mortgage interest,
• Paying lower closing costs,
• Comparing similar or different mortgages to find the best one,
• Minimizing out of pocket expenses.

The ATOMIC method will turn you into one of the most educated consumers on the market when shopping for mortgages because most people don’t have this knowledge. Lenders will no longer be fooling you with their offers. You’ll be comparing different offers as if you’re an industry insider. Revealing this information to you is not something your local bank loan officer would want me to do. An educated borrower, for most loan officers, is a pain. Therefore, pay close attention, take notes, and get ready to save a lot of money!

Armed with this information you will be one of the most powerful mortgage shoppers out there. No longer will a lender be able to temp you with what seems to be a good offer, while they sweep the costs under the rug in another section of the loan estimate. In contrast with uneducated shoppers, you will start receiving the best offers available out there on the market!

What the AMOTIC Method of Mortgage Savings Won’t Do For You

The ATOMIC method is a step-by-step, surefire way for you to save money. If you do the work required by my method, you will save money. What the ATOMIC method won’t do is teach you how to find good lenders to shop. That is a vast topic that deserves a whole separate section. I’m expecting for you to figure that out on your own. Make sure to put in a lot of research into the lenders you approach for quotes because if you’re comparing only high cost lenders, then the best offer you’ll get is the lowest of the high cost offers. If you’re in California and need a recommendation, message me privately and I’ll try to get back to you soon.

 

“What the ATOMIC method won’t do is teach you how to find good lenders to shop. You’re expected to do that on your own. Make sure to put in a lot of research into the lenders you approach for quotes.”

 

The ATOMIC method won’t tell you how to pick a specific type of mortgage (i.e. 30-Year Fixed vs. 20-Year Fixed). The method is designed to be implemented after you determine what type of mortgage is right for you. This is what a reputable mortgage professional can help you with, or perhaps your financial advisor. I suggest you spend a lot of time thinking about this question before you move on to implementing my ATOMIC Method of Mortgage Savings.

In conclusion, get ready to save a lot of money but also get ready to put in more than a few hours of your time. You’ll get better results by putting in more time, because doing a lot of research upfront is one of the best ways to prepare yourself for a successful negotiation.

Interest Rate – “I” – Mortgage Interest

The interest rate of a mortgage is one of the most important things to consider, although it shouldn’t be the only thing. You should pay special attention to the interest rate. The bigger the loan amount, the more the interest rate will make a difference. 

What is an Interest Rate

The interest rate, also know as the Note Rate, is one of the variables that determines the total costs of the loan. For example, let’s test the monthly payment difference between 4% and 5%.

If we look at a $100,000 loan, the difference between the two interest rates is $59.41 a month. That’s $21,386.28 over 30 years. For a $500,000 loan, the difference is $297.03 a month, and $106,931.40 over 30 years. The difference ca be staggering. This is why we usually see a wave of refinances when market rates drop by even as little as half a percentage point–people save a lot of money by refinancing.

Interest rate savings can buy you a lot of things you like.
Buy this pillow accessory set to celebrate all that money you’re going to be saving by getting a lower interest rate!

How Interest Rates Are Determined

Interest rates are a function of risk. The lender, like any prudent investor, looks at the risk-free investments available on the market (such as Treasury bonds). They then add a risk premium to compensate themselves for taking a chance on lending money to a prospective borrower.

While T-bonds are virtually 100% secure, mortgage notes are not. If the borrower defaults, the lender can technically recover their investment, but at a big cost. The lender will not receive monthly payments from a defaulting borrower for a period of time, will have to hire a law firm to foreclose on the house, and then have to pay a real estate agent to sell the home–in the meantime they would be experiencing loses in the form of “opportunity cost” (i.e. not earning a risk-free return from T-bonds while all this is happening). Therefore, the higher the lender’s risk, the higher the interest rate will be.

This is how lenders determine risk; they look at the following parameters:

  • Amount of equity in the home,
  • Borrower’s credit history,
  • Location of real estate,
  • Type of real estate being financed,
  • Local and nationwide market conditions.

For these reasons, you might compare two exact loans but see a big difference between interest rates based on who the borrower is, the type of real estate it is, the location, and the date the loan was written.

Method

While comparing two rates against each other is simple, what you should really focus on is the interest rate plus other terms of the loan, such as the fixed period, closing costs, and total money out of pocket.

Here are some actions you can take to get better rate offers from lenders:

  • Saving up a bigger down-payment, for a purchase;
  • Fixing up your house and increasing the home’s appraised value, for a refinance;
  • Improving your credit score and taking care of unpaid bills prior to applying for a mortgage;
  • Applying for loans when market conditions are favorable to you;
  • Applying for loans with multiple lenders, or one reputable mortgage broker, and let your loan officer know that you’re shopping.

These tips will help you get the lowest interest rate.