3 major mortgage interest rate questions to ask your lender now
Mortgage interest rates are cooling once again. After rising to their highest level since 2000 last summer and hovering just under 8% at the end of 2023, rates on a 30-year mortgage are down almost a full percentage point right now – and they're predicted to fall further later this year. With inflation cooling, the Federal Reserve is moving toward a reduction in its federal funds rate, which most expect to lead to a drop in average mortgage interest rates, too.
Homebuyers and current owners looking to refinance, then, may want to start making certain moves now in preparation. And that extends to working with your lender. To better improve the process – and to raise your chances of securing the lowest mortgage interest rate possible – it's important to know which questions to ask your lender, particularly in today's evolving rate climate. Below, we'll detail three major questions to ask right now.
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3 major mortgage interest rate questions to ask your lender now
To more effectively work with your mortgage lender, and to improve your chances of finding the most cost-effective mortgage interest rate, make sure to ask the following three questions:
Does the rate listed include mortgage points?
Mortgage interest rates change daily. As the economy improves and rates come down, you may be surprised to see how low of a rate your lender is listing on its website. But, in many cases, that listed rate includes adding mortgage points. Mortgage points are a fee lenders charge borrowers to secure a lower-than-average rate. This could cost a substantial amount, paid either upfront at closing or by being added to the overall mortgage loan. So be sure to ask if the rate listed already accounts for that reduction, as well as what the rate would be for qualified borrowers without it included. You may be surprised at the difference.
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What would an adjustable-rate mortgage look like?
An adjustable-rate mortgage may be worth investigating in today's less-than-ideal rate climate. This involves locking in a set rate for a select few years before it goes through an adjustment period in the following years. This could be a risk when rates are steadily climbing but may be worthwhile now with most predicting multiple rate cuts happening ahead. Plus, you could wind up securing a slightly lower rate to start than you would have gotten with a traditional mortgage loan. Be sure to ask your lender what an adjustable-rate mortgage would look like now so you can better determine if it works best for you.
How long will a rate lock last?
With lower rates now available and nothing guaranteed economically, it may be smart to lock in a mortgage rate now while you can secure a reasonable one. But remember that mortgage rate locks will expire after a certain period. Ask your lender, then, how long a rate lock will last. And, further, ask about your options if the rates drop lower than your locked one. You don't want to miss out on today's lower rates but you also don't want to be so conservative that you miss out on a potentially cooler rate climate soon.
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The bottom line
An informed homebuyer asks the correct questions at the correct times. And right now, with interest rate cuts imminent, is one of those times. So if you're looking to buy a home or refinance your existing one, make sure to ask about mortgage points, adjustable-rate options and the length of time a mortgage rate lock lasts with your lender. The answers to each question may not be as favorable as you prefer, but by gathering as much information as possible you can better determine which is the best option for you.
