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5 Ways Homebuyers Can Save When Mortgage Rates Are Rising

Prevu brings you 5 tips for attaining homeownership in a quickly changing market.

Presented by Prevu June 28, 2022

As rising rates begin to shift the real estate market in Seattle, buyers are encountering mortgage payments that are much more expensive than they were a year ago, driving many folks to rethink their home purchases.

Depending on your home ownership goals though, now might still be the best time to buy. You just have to find ways to save on mortgage costs.

Below the team at Prevu Real Estate compiled a few tips on how to make your home purchase more affordable amid rising mortgage rates.


Buy down your rate with mortgage points

If you plan to stay in your new Seattle home for a long period of time, you may want to consider paying points upfront on your mortgage.

Mortgage points are essentially a lump-sum interest payment at the time of closing that allows you to “buy down the rate,” with the benefit of a reduced monthly mortgage payment. Yet not all lenders offer this option, so make sure to ask about points as you speak with different mortgage providers. 

Typically, each point you buy equals one percent of your loan, so a point on an $800,000 mortgage is $8,000. In exchange for this upfront payment at closing, a lender may offer you a mortgage rate that is lower by 0.125% to 0.25% vs not paying points. As a result of the lower rate, you will pay less interest over the life of the loan.


Choose an agent that offers commission rebates

Believe it or not, choosing the right agent to help you buy your Seattle home is one of the best ways to save.

You should speak with multiple agents to understand their experience selling homes and whether they offer commission rebates. These tools allow brokers to pass along a portion of their commission to buyers after closing. 

Prevu Real Estate provides the largest commission rebate in Seattle, offering up to two-thirds of their buyer agent commission to new homeowners. These savings can go a long way to cover mortgage origination fees or other expenses.


Buy all cash if you can

Not everyone has a cool million or two lying around to purchase pricey Seattle real estate, but if you do, you may want to use it in the current environment.

Making an all-cash offer is a good plan for people who have the money on hand. Financially savvy folks may balk at the idea of paying 5% or 6% to borrow money, considering the recent memories of mortgage rates at 3% or lower just a year ago. 

Paying all cash not only saves you on paying interest, it also saves you money on closing costs. Without a mortgage, homebuyers cut out costly transaction items like origination fees.


Depending on your plans for homeownership, putting your cash into your home’s equity may help you experience less stress as financial markets like stocks and bonds enter a period of greater uncertainty.


Consider an adjustable-rate mortgage

Your financing methods should reflect your goals, as different mortgage products can help you save during your time of ownership. Most people only own their homes for a period of 7 to 10 years, so pursuing a fixed-rate 30-year mortgage may not align with your needs.

If you plan to spend only several years in a home, you should evaluate using an adjustable-rate mortgage (ARM) to achieve a lower monthly mortgage payment. The interest on these mortgages is fixed for a set period of time, commonly for three to ten years depending on the loan terms, and the mortgage rates during that fixed period tend to be lower than a 30-year fixed mortgage rate.

But after that, the rate floats depending on market conditions and adjusts on a set schedule, so an ARM does create potential risk if rates are higher and you live in the home longer than the fixed period.


Improve your credit score

One of the best ways to lower your mortgage costs is by having a good credit score. Lenders want to see that you are responsible, and they figure this out by looking at your credit journey.

A high score may qualify you for lower mortgage rates, as your history proves you present less credit risk to the lender. You can easily check your credit score online through credit bureaus like Experian, TransUnion, or Equifax.


While it is easy to look up your score, there is no overnight secret to improving it if you have not worked on your credit. The process takes careful planning and time. For instance, lenders want to see consistency, so building up your credit score with timely payments on credit cards or maintaining low or zero balances can make a big difference.

If you are not happy with your current credit score, take the steps to improve it, and it may mean a lower mortgage rate when you decide to buy a home.


Interested in buying a home in Seattle? Browse listings in your favorite neighborhood and see how much you can save with Prevu’s Smart Buyer Rebate.

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