| Lenders calculate mortgage interest rates on three | | | | existing bill on time every time. Within 12-24 months, |
| major factors - down payment, credit history and the | | | | your credit will improve, and so will your offered |
| current economic market. Sometimes your rate is | | | | interest rate. |
| negotiable, and other times you may just have to settle | | | | 3. Economic Markets |
| for a higher interest rate. Keep reading to learn why | | | | Lenders base their interest rates on an economic |
| your interest rate is high and how you can reduce it in | | | | index or standard. In the United States, lenders use the |
| the future. | | | | Cost of Funds Index (COFI), London Interbank Offered |
| Why is my mortgage interest rate high? | | | | Rate (LIBOR), 12-Month Treasury Average (MTA), |
| 1. Low Down Payment | | | | Bank Bill Swap Rate (BBSR), Constant Maturity |
| Typically, the lower the down payment, the higher the | | | | Treasury (CMT) and the National Average Contract |
| interest rate that will be required of the lender. If you | | | | Mortgage Rate upon which to base their interest rates. |
| can walk into a lender's office with an amazing down | | | | If market interest rates are high, then the rates offered |
| payment of 20 percent, you won't have to pay | | | | by lenders are also going to be high. If you're facing an |
| mortgage insurance, and you'll be in a much better | | | | economy with high interest rates, you may want to |
| position to negotiate a lower interest rate. A slightly | | | | wait until rates lower again before shopping for a |
| lower rate may not sound like much on the surface, | | | | home mortgage. Doing so may not get you out of a |
| but the difference over the live of a loan can be tens | | | | rental situation as quickly as you'd prefer, but the |
| of thousands of dollars in savings! | | | | money you save through patience may make biting |
| The inverse is also true, though, about the amount of a | | | | the bullet worth the wait. |
| down payment. A low down payment of 5 percent will | | | | How can I get a better rate in the future? |
| mean you'll have to pay for mortgage insurance and | | | | It may be possible to renegotiate or refinance your |
| you'll be given that higher rate. | | | | mortgage at a later date. Once your credit has |
| 2. Poor Credit Rating | | | | improved, built up equity in your home, and interest |
| Lenders base the bulk of their lending decisions on | | | | rates have declined, you can shop around for lower |
| your credit report and score. If you're a high-risk | | | | rates. Interest rates constantly fluctuate, so don't |
| borrower, meaning you have a history of not paying | | | | become overly anxious and consequently jump into a |
| your debts on time or you have credit delinquency, | | | | mortgage pre-maturely. |
| you'll either be denied a loan altogether or offered a | | | | Basically, refinancing or renegotiating a mortgage |
| much higher interest rate. | | | | means you pay off your old loan and sign for a new |
| Because lenders see you as a greater risk, they are | | | | loan. You can either do this with your existing |
| essentially 'hedging' their bets by increasing your | | | | mortgage provider or shop for a new one. If you |
| interest rate. If your credit's poor, you may have to | | | | move to a different lender, you may have to pay an |
| settle for a higher rate. To improve your credit, take at | | | | early payment penalty. Investigate this before making |
| least a year (two is better) and focus on paying every | | | | your move. |