Save your dollars on your variable rate home loan and stay at an edge over others
Are you in the market to take out a home loan for realizing your dream of becoming a homeowner? If answered yes, you must have been confused to know the wide array of home loan options available in the market. Mortgage loans are generally categorized into three types, the fixed rate home loans, the variable rate home loans, and hybrid loans which carry some features of both fixed rate and variable rate loans. Although there are many advantages of taking out fixed rate loan, it is not that variable rate loans shouldn’t be taken out. There are number of lenders like NPBS who lend variable rate home loans and if you wish to save your dollars on such loans, here are some steps that you need to follow.
- Reduce the term of the loan: Like most lending institutions, they offer variable rate home loans with a standard 20 year bond. If you can shorten the term of the loan by only a couple of years, you can cut down the interest rates considerably, thereby saving hundreds of your dollars. That may create the difference between seeking an early retirement and having to continue work.
- Pay more than the scheduled payments: If you decided to shorten the term of your home loan, you can afford to pay a little extra payment each month. For that you might have to sacrifice some of your expenses, but that will help you in the long run. Even a few hundred dollars added to your variable rate home loan payment might save thousands on interest rate.
- Make extra payments: Speak to your lender about the penalty charges of making extra payments on your home loan. If you’re lucky enough and if you don’t have to pay penalty charges for pre-paying on the loan, you can remind yourself to make additional payments whenever you think is possible for you. You can use a mortgage calculator to check how you’re saving on this venture.
- Shop around and compare rates: Remember that there is never any harm associated with finding out what the other lenders are offering you. However, make sure you remember that seeking the lowest rate is not always the only criterion to look for. The lowest rate that you get today might not be the lowest tomorrow. Also be aware of the fine print. Consider the flexibility of the loan so that you know whether or not you’re able to change the terms according to your own wish.
- Steer clear of introductory rates: There are some organizations which lower the initial rate and name it as a ‘gift’ rate to lure customers. Such offers are generally replete with pitfalls and different hidden costs. You might have to pay a much higher rate once this period comes to an end.
Many mortgage lenders recommends prospective homeowners to be careful while taking out variable rate home loan or any other types of loan. He also adds by saying that homeowners require managing their finances to the utmost level so that they can cope up with the changing rates.