If you are planning to purchase a property, then one important thing that will be in your mind is the interest rate of the loan. You will be looking for financing options which charge the least interest. However, finding such a funding source is easier said than done. But to ensure that you get the lowest interest rate from any lender, you can adapt the tips mentioned below.
Large Down payment
Though most people look forward to paying as little down payment as possible when investing in property, this might actually be a bad idea. Generally, you will have to pay about 20% of the home value as down payment. Now, if you can bump it up to 30% or more, then the financing institutions are likely to lower their interest rates. This means that you will only be paying less amount overall as loan repayment. So, before you agree to the loan terms, make sure that you talk with your financier and ask them whether they are ready to charge less interest if you make a larger down payment. If so, then you should definitely move in that direction.
Consider buying the property as a primary residence in which you plan to live. This can help you get the loan at lower interest rates. Now, the banks will have stringent rules to ensure that you actually do live in the home. If you buy the home as primary residence and then try to sell it off as soon as you can, then you may get into trouble with the lending institution. Banks will normally expect you to live in the home for a particular period of time, say one year. But once the stipulated time period is over, you can easily sell off the property.
Good Credit Score
Your credit score will play a major role in determining your interest rates. The higher the score, the lower interest you will have to pay. And the lower your credit score is, the more you will have to pay as interest. As such, it is important that you check your credit score before applying for a loan. If your credit score is low, then look for ways to improve them. And only apply for the loan when your credit score has increased.
Assume The Mortgage
If a property you are interested in already has a loan on it, and the interest rates on them are lower than what you will get for a loan to buy that property, then it is better that you assume the seller’s mortgage while buying the property. This will give you the ownership of the property while making you liable only for the existing loan on it. A side benefit of this type of arrangement is that you will not have to pay any large amount as down payment.
So, keep the above points in mind when looking for a property loan, and you will be able to identify the best financing opportunities. Plus, don’t forget to check out the smaller banks in your neighborhood since they might be able to offer you better interest rates than the big banks.