how to lower your mortgage payment

Choose Your Finance Incentive

The new year is off to a great start with Jordan Ranch builders offering incentives to bring down your monthly mortgage payments. What are your options and which builders are offering them? We break it down for you on how to lower your mortgage payment.

How to Lower your Mortgage Payment:

Buy Down Interest Rate

Lowering your interest should be a top priority when it comes to how to lower your mortgage payment and buying a new home. To do that, many homebuyers are turning to interest rate buy downs. A buy down is when you lower your interest rate by paying a little extra money upfront. How much you lower your rate depends on how many “points” you buy. 

Each point is equivalent to 1 percent of the loan amount. As an example, the lender may offer to reduce your rate by .25 percent in exchange for a point. If your mortgage is $300,000 with an interest rate of 4 percent, paying $3,000 would lower your interest rate to 3.75 percent. 

Commonly structured buy downs are 1/0, 2/1 and 3/2/1. For a 1/0 buydown, your rate drops by 1 percentage point in the first year of the mortgage. In a 2/1 buy down your rate drops by 2 percentage points during the first year. 3/2/1 buy downs are expensive, but drop your rate by 3 percentage points the first year, 2 points the second year and 1 point the third year. 

This month, David Weekley HomesHighland Homes and Perry Homes are offering to pay some of the cost of a buy down if you use their preferred lenders. Both David Weekley and Highland Home are offering up to $20,000 toward a rate buy down while Perry is offering $15,000. 

Interest Rate Locks

Locking down your interest rate protects you from fluctuations in the market that could result in a higher monthly payment than expected. To lock in an interest rate, you agree to pay your lender a fee. In return, your lender agrees to honor a specific interest rate for a set period, of time, usually between 30 and 90 days. During that time if interest rates go up, you will maintain your lower rate. 

Rate locks are only offered by lenders. Some may offer them with pre-approval, others once you have signed your contract. Keep in mind that if you lock in too early and your closing is delayed, the lock can be voided by the lender. It’s generally best to lock in your rate once you have made an offer on a home. 

Rate lockdowns are not free. How much you pay depends on your lender. If you need an extension, you can pay an additional fee, usually 0.375 percent of the loan amount.

David Weekley is offering up to $20,000 toward an interest rate lock when you use their preferred lender to purchase a new home. 

Closing Costs

Closing costs are processing fees you pay to your lender. They cover things like your home appraisal and searches on your home’s title. The amount you pay depends on your type of loan and where you live. As a rule, closing costs can make up 3 to 6 percent of your loan amount. This means that if you take out a mortgage worth $200,000, you can expect closing costs to be about $6,000 to $12,000.

Closing costs are due when you sign the final paperwork. David Weekley and Perry will help you if you purchase your home by Jan. 31 and use one of their preferred lenders. David Weekley is offering $20,000 while Perry is offering $15,000.

It’s Your Choice

Finance incentives are a great way to lower the cost of your new home in Jordan Ranch. And with builders offering such variety, you’re sure to find the one that’s the right fit for you.