If given a choice to choose between 2 home loan offers with different interest rates and every other condition being the same, one would choose the offer with the lower rates. The only party that would prefer the higher rates would probably be the lender.
Financial products are complex and how rates are determined vary with different lenders. Different lenders will have different internal policies and operating costs to consider when deciding on rates to charge on their products.
Paying more for your home loan does not make financial sense especially when you can get a better interest rate from a different lender for a similar home loan. Interest rates are something that shouldn't be ignored when seeking a mortgage as a small different in rates can mean thousands of dollars in savings.
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Before going about on your mortgage hunt, here are some quick tips to consider that can help you find the lowest rates.
1) Have an understanding of how interest rates are determined by the lender.
Interest rates are determined by factors that cannot be determined by a single person or bank. This is especially so if the offer that has been presented to you is benchmarked to a particular nation-wide rate. If the rate of your mortgage is benchmarked to yields on treasury notes, it would be helpful to learn how treasury note yields are set and how market changes can have an effect on the yield which will affect your mortgage rate.
2) Find the cowboy lender.
In every competitive market, there will always be at least one player that is going against conventional unwritten rules to serve the market. The market for home loans is a playground for the most competitive of players with strong resources. Recognize the cowboys and approach them about your needs. They are most likely to be flexible in meeting your specific requirements.
3) Get home loan offers from at least 3 lenders.
Obtaining a few quotes assists to you make home loan comparison and also helps you get a feel of the current market. You can learn what are the terms that are more flexible than others. For example, if the interest rate lock-in period from a particular lender is double that of the other lenders, you will know that there is a good chance of negotiating on this particular term. Very often, you will find an offer that really stands out from the rest by comparing between offer.
4) Question and negotiate.
Don't be embarrassed to negotiate for lower interest rates. Rates that are advertised over mass media are not always a rate that is engraved in stone. Your lending officer may be eager to close the deal and willing to request for lower rates on your behalf on certain conditions.
Home loan lenders all offer an almost identical product that helps you buy a house. Make an effort to find an offer with the lowest interest rates as it makes little sense to pay more for something that can be bought for less.
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