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Mortgage Rates Are Up; Your Closing Costs Can Still Go Down

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Financing a home has become more expensive since the start of the year. The average rate on a 30-year, fixed-rate loan had risen to 7.17% on April 25 from a 2024 low of 6.60% on Jan. 18. There are ways to save, starting with a $500 rebate on mortgage closing costs from Tropical Financial Credit Union. The offer ends May 31, 2024.

The money will help. A borrower in Miami-Dade County financing $585,000 now is paying $223 more monthly in principal and interest in late April than in mid-January. (The loan amount is based on a recent median sales price of $650,000, according to the Miami Association of Realtors, and a 10% down payment.)

Over eight years, the typical period before homeowners sell or refinance, the total additional interest cost is $21,408. There are ways to reduce what you’ll pay upfront and over the years you live in your new home:

Comparison shop for third-party services. Get quotes from several providers on their fees for appraisals, title insurance, inspections, and surveys. You save hundreds or even thousands of dollars at closing.

Negotiate with the seller. A year, even a few months ago, South Florida was a seller’s market. Demand is slowing, and more residences are on the market. That gives you a better bargaining position. While motivated sellers might not budge on price, they may be willing to contribute money toward your closing costs.

Make a larger down payment. The more you contribute now, the lower your monthly payment. If you can scrape up a 20% down payment, you can avoid having your property taxes and insurance premium escrowed monthly.

Speaking of insurance, shop around. In the past several years, home insurance companies have closed shop or stopped renewing policies. That trend is reversing. A good independent agent can help you explore your options.

Consider an adjustable-rate mortgage, maybe. ARM rates have also risen this year. According to Bankrate.com, they averaged 6.69% on April 28, up from a 2024 low of 6.02% on Jan. 28 on what’s called a 5/1 home loan. It fixes the starting rate for five years and adjusts yearly after that. Based on current averages, you’ll pay about one-half of a percentage point less on an ARM than a fixed-rate loan for the first 60 months. After those five years, the lender can raise your ARM rate annually.

Not planning to move? When you borrow against your equity to improve your residence or consolidate your debts, Tropical Financial will pay you up to $250 at loan closing. For details, contact a lending officer.