How to Pay Less Interest on Mortgage: 7 Tips for HomebuyersFor most Americans, a mortgage is the largest financial commitment of their lives. Even a small reduction in interest rate—say 0.5%—can save homeowners tens of thousands of dollars over the life of a loan. According to Freddie Mac, refinancing when you can cut your rate by 0.5%–1% often makes sense because of long-term savings.
If you’re a first-time homebuyer or planning to refinance, here are the best strategies on how to pay less interest on mortgage.
Shop Around and Compare Multiple Lenders
Shop Around and Compare Multiple Lenders with Loan Factory AppNever settle for the first lender you talk to. The Consumer Financial Protection Bureau (CFPB) found that borrowers who compare offers from at least three lenders save an average of $3,500 over a 30-year loan.
With Loan Factory’s platform, you can instantly compare rates from 240+ wholesale lenders side by side. That means more transparency and a higher chance of securing the lowest rate available.
Improve Your Credit Score Before Applying
Improve Your Credit Score Before ApplyingYour credit score has a direct impact on the mortgage rate you qualify for. For example:
- Borrowers with FICO 760+ often secure rates up to 0.5% lower than those with a 660 score.
- Over 30 years, that difference can equal $30,000–$40,000 in interest savings.
Action step: Pay down credit card balances, avoid opening new accounts before applying, and check your credit report for errors.
Make a Larger Down Payment
Improve Your Credit Score Before ApplyingA bigger down payment means you borrow less, which lowers both your principal and interest.
- With 20% down, you also avoid private mortgage insurance (PMI), which can cost $100–$300 per month.
- Lower loan-to-value ratio (LTV) = better interest rate offers.
Choose a Shorter Loan Term
Choose a Shorter Loan TermA 15-year mortgage usually comes with a lower rate compared to a 30-year mortgage. While monthly payments are higher, you pay far less interest over time.
- Example: On a $400,000 loan at 6.5% (30-year), total interest = $510,000.
- Same loan at 15 years, 6% rate = $208,000 interest.
That’s a savings of $300,000+.
Refinance When Rates Drop — and Use Free Rate Alerts
Refinance When Rates Drop — and Use Free Rate AlertsMortgage rates fluctuate daily. According to the Mortgage Bankers Association (MBA), many homeowners miss out on savings because they don’t track rates closely.
- Even refinancing from 7% → 6.25% on a $350,000 loan can save about $160/month and nearly $57,000 over the loan’s life.
Good news: At Loan Factory, homebuyers can create a free rate alert. Simply set your target rate, and the system will notify you instantly when it becomes available. No credit pull, no cost—just smarter timing so you never miss a chance to pay less interest.
→ Read more: Does Refinancing Lower Your Monthly Payment?
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Make Extra Payments Toward PrincipalPaying just one extra monthly payment per year (or switching to biweekly payments) can shave years off your mortgage and save tens of thousands in interest.
- Example: $300,000 loan, 30 years at 6.5% interest rate. One extra monthly payment yearly = pay off 4 years early and save $60,000+ in interest.
Avoid Junk Fees and Overcharges
Avoid Junk Fees and OverchargesSome lenders charge unnecessary fees that inflate your overall loan cost. Loan Factory guarantees:
- Zero junk fees
- Only real third-party costs like appraisal, title, and insurance
This ensures every dollar you save goes directly toward lowering your interest burden
“At Loan Factory, we make sure homebuyers feel confident and supported—helping them secure the lowest rates and avoid paying unnecessary interest over the life of their loan.” — Thuan Nguyen, CEO
Learning how to pay less mortgage interest is about smart planning: compare lenders, improve your credit, choose the right loan term, and take advantage of refinancing when rates drop.
With Loan Factory’s AI-powered platform, you can:
- Compare 240+ lenders instantly
- Create a free rate alert to lock in savings at the right time
- Avoid junk fees and hidden costs
→ Read more: Top 10 Mortgage Brokers in USA 2025 – Scotsman Guide Ranking
Ready to save on your mortgage? Check your personalized rate and set up a free rate alert at LoanFactory.com .
FAQs on How to Pay Less Interest on Mortgage
