How to Reduce Mortgage Interest
On a 30-year mortgage, you often pay more in interest than the home originally cost. Here's how to change that.
Before You Close: Buy Down Your Rate
Mortgage discount points let you pay upfront (1 point = 1% of the loan) to lower your interest rate. Typically, 1 point reduces your rate by 0.25%. This makes sense if you plan to stay long-term.
Example: $400,000 loan, buying 2 points
See What This Looks Like for Your Situation
Every mortgage decision depends on your numbers, timeline, and goals. We'll break it down clearly so you know what actually makes sense.
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All Strategies to Reduce Interest
Improve your credit score before applying
Going from 680 to 740+ can reduce your rate by 0.5–0.75%, saving $40,000+ over a 30-year loan.
Make a larger down payment
Putting 20% down eliminates PMI and often gets you a better rate due to lower LTV risk.
Shop 3+ lenders
Rates vary by 0.5–1% between lenders on identical loans. CFPB research shows this saves $1,500/year on average.
Refinance when rates drop
A 1% rate reduction on a $400K loan saves $235/month and $84,000 over the life of the loan.
Make extra principal payments
Every dollar paid to principal today saves $2–3 in future interest, depending on your rate and time horizon.
Choose a shorter loan term
15-year fixed rates are typically 0.5–0.75% lower than 30-year rates, and you pay half the interest period.
Example Scenario
Let's say you have a $500,000 home in Phoenix with a remaining balance of $320,000.
If you refinance and your closing costs come in around $10,000, but you reduce your monthly payment by $350, your break-even point would be around 28–30 months.
If you plan to stay in the home longer than that, the move may make sense. If not, it may not.
This is where strategy matters — not just rates.
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