If you’re in the housing market, you may have noticed that mortgage interest rates have been on a sharp rise in 2022. However, don’t let that discourage you. There’s a few ways to get around these rising interest rates, and secure a lower rate for your new home loan. Keep reading below to learn more. 

Mortgage Points

Buyers can lower their mortgage interest rate by paying for discount points upfront. Discount points are a trade-off: you can pay more money upfront in exchange for a lower mortgage interest rate. 

Typically, each discount point costs 1% of the total loan amount. So if you’re looking to take out a loan of $300,000, one discount point costs $3,000 and lowers your rate by 25 points, or 0.25%. 

Adjustable-Rate Mortgage 

Lenders offer adjustable-rate mortgages (ARMs), which come with a lower interest rate up front. Usually it’s a fixed time period of three, five, or seven years of a 30-year loan. Meaning that during this initial time period, the rate is lower. 

It’s important to know, however, that after this initial period of lower interest rates, the rate can be adjusted based on a margin and index detailed in your loan. This can lead to a higher monthly rate in the future. 

Shorter-term Loans

It’s possible to get a shorter-term loan from lenders, typically a 15 or 20-year loan. Interest rates for a 15-year loan that is 0.5% to 0.75% less than 30-year rates. 

That does mean, though, that 15-year loan payments are higher. You will be paying off the same loan amount in half the time, so be sure that the numbers make sense for your financial situation.  

Increase Your Down Payment 

Larger down payments signify to the lender that you’re a less risky borrower. If you were to make a larger down payment, it’s possible that you could get a lower interest rate as well. 

Another plus side to this strategy is that you can bypass paying for private mortgage insurance on a conventional loan. Down payments of 20% or more can give you a significant financial advantage in the long run. 

Making Moves 

Take a look at the tips above and decide which ones are best suited for you. Also, don’t forget that you can make lenders compete for your business as well. In a housing market with rising interest rates, competition is not as strong. That means lenders will be more eager to get your business, and will bid against each other to secure your loan. Mortgage Brokers may be able to get you a favorable interest rate as well. So keep your options open and take advantage of the right opportunity.