Mortgage Rates Are Soaring. Do These 3 Things to Squeeze Out Some Savings

With the right strategy, you can spend less in the course of borrowing for a home.

Between mid-2020 and late 2021, home buyers looking to take out a mortgage got to enjoy ultra-low rates. But that ship has clearly sailed for today's buyers.

Mortgage rates have been going up since the start of 2022. And they've risen at a very rapid pace. Worse yet, there's a good chance that mortgage rates will continue to climb as the Federal Reserve moves forward with a series of planned rate hikes.

If you're looking to buy a home, you may be ready to accept the fact that you're going to get stuck with an annoyingly high interest rate on your mortgage. But before you do, consider these strategies for eking out some savings on your home loan.

1. Boost your credit score as much as possible

The higher your credit score when you apply for a mortgage, the more likely you'll be to snag a more competitive rate on your loan. Now this isn't to say you need to push for perfect credit -- that's really hard. But if you're able to get your score into the upper 700s or low 800s, you'll put yourself in a strong position to reap some mortgage-related savings.

There are a few different ways you can boost your credit. First, pay all bills on time. Your payment history carries more weight than any other factor when determining your credit score, so if you're meticulous about making on-time payments, you'll be doing yourself a big favor.

At the same time, work on whittling down existing credit card debt. Doing so could bring your credit score up quickly, and also leave you with a lower debt-to-income ratio, which is another metric mortgage lenders look at when assessing home loan candidates.

2. Opt for a shorter-term loan

The longer it takes you to pay off your mortgage, the higher you can expect your loan's interest rate to be. If you're willing and able to take out a 15-year mortgage over a 20- or 30-year loan, you'll generally be able to snag a lower interest rate -- sometimes, a much lower one.

Of course, signing a 15-year loan also means facing much higher mortgage payments on a monthly basis, so you'll need to crunch the numbers and make sure you can swing them. But if you're able to fit those higher monthly payments into your budget, you could end up with a large amount of interest-related savings.

3. Shop around

When it comes to giving out home loans, each mortgage lender is able to set its own rate, which means there may be one lender whose offer is more attractive than another's. That's why it's so important to shop around for a home loan rather than accept the first offer you get. Even a slightly lower interest rate could amount to big savings in the course of paying off a large sum of money over a longer period of time.

While today's mortgage rates are much higher than they were last year, that doesn't mean you're doomed to get stuck with a rate that's not affordable. If you take these steps, you might manage to enjoy a bit of savings at a time when it's gotten more expensive to borrow across the board.