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How to get the best interest rate on your mortgage

Couple in their new home shaking hands with real estate agent after closing
April 11, 2019

By Maggie Tomasek

Mortgage rates can fluctuate significantly from month to month, week to week or even day to day. How are you supposed to know you’re getting the best interest rate on your mortgage? And how do you know when it’s the right time to buy, sell or refinance? You don’t need to be an expert on mortgage rates predictions. We’ve compiled some tips from Alliant’s mortgage loan officers to help you navigate any mortgage rate environment and make the right decision for you.

Tips for home buyers when mortgage rates are rising

When mortgage rates are rising, buyers should plan to act quickly. The longer you wait to buy your home, the more it may cost you in interest on your monthly payments. Even a 0.25% difference in the interest rate on a mortgage can add up to thousands of dollars over the life of the loan. Also, take a close look at adjustable rate mortgages (ARMs) as an alternative to fixed rates. You might find more flexibility and savings on your interest rate with an ARM. A rising rate environment also most often results in a “buyer’s market,” where there are fewer buyers than sellers. This may give you more negotiating power in both purchase price and seller concessions, which can save you money, time and effort.

Tips for home buyers when mortgage rates are stable or declining

A stable or declining rate environment flips things to a “seller’s market,” with more home buyers trying to take advantage of the lower interest rates on mortgages. Be prepared to pay the listing price – or more – for desirable properties in desirable locations. It’s also even more important for you to get prequalified by a lender before you begin looking at properties because time is of the essence once you do find a home. You don’t want to miss out on the home of your dreams because another buyer put in their offer while you were still trying to get prequalified. Although fixed rate loans might be the better option, an ARM could still be right for you, depending on how long you plan to stay in the home. On average, Americans only have a mortgage for eight years before selling or refinancing, so a 10/1 ARM could offer savings or create equity more quickly on your new purchase.

Tips for refinancing in any rate environment

There are a lot of myths about refinancing, such as that your rate needs to be 2% below your current rate or you need to recoup the new closing costs in 1-2 years for it to make sense. The good news is that most reputable lenders will provide you with a no-cost refinance analysis and examine your options. With a refinance analysis – which all homeowners should have done periodically, regardless of whether rates are rising or declining -- you can decide which path makes the most sense for you and how quickly, or if at all, you want to act.

Here are some options that a mortgage loan officer may suggest when you have a refinance analysis: 

  • Switch from an ARM to a fixed-rate mortgage in rate falling environment.
  • Switching from a fixed-rate to an ARM in a stable or rising rate environment.
  • A new loan term to reduce your monthly payment or shorten the length of your loan.

Rates aren’t the only factor to consider when deciding whether to refinance. For example, you may need to do a cash-out refinance to pay off other debt, make a large purchase or put a down payment on a second home or investment property.

The most important tip for home buyers

In the home buying process, don’t overlook how important it is to find a mortgage loan officer you trust. And when you’re reviewing your financing options, ask them about where they think the market is going. While they can’t make mortgage rates predictions with 100% certainty, loan officers can provide insights, based on industry trends and analysis, on where rates could be headed over the next 30-60 days. This will give you the opportunity to secure the best possible interest rate on your mortgage. What’s more, developing a good relationship with your mortgage loan officer during the buying process will pay off when it comes time for your refinance analysis or your next home purchase.


Maggie Tomasek is the PR & Content Strategist at Alliant. She began her career as a journalist for newspapers in Utica, N.Y., Des Moines and Cincinnati before moving to Chicago in 2009. Maggie is an eight-time Chicago Marathon finisher and a lifelong creative writer with a passion for comedy. Her mom instilled in her a great sense of fiscal responsibility, and her big sister told her to throw that responsibility out the window every once in a while in the name of life experience. So far, that combination of financial advice has worked out pretty well for her.