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Things You Should Consider While Doing Mortgage Rate Comparison


With so many lenders present in the home mortgage market, people often get perplexed while deciding which loan type to choose and from which lender. This confusion is obvious, as home mortgage is not a small loan amount that an individual pays back in a couple of years. Most people take these loans for 15 to 20 years’ time frame. Therefore, your choice of a lender and loan type could have a huge impact on your finances. Most people depend on mortgage rate comparison for deciding the lender. However, this process is not as easy as it may sound. Simply, going through the comparison charts that indicate the interest rates or equated monthly installments will not help you to take the right decision. Your choice should be influenced by host of factors; not just the monthly installments or the interest rates’ figures.

So, you must be thinking about the key factors you should look for while doing mortgage rate comparison. The first thing you should remember is that you should compare only same loan products offered by different lenders. There are different types of loans, like fixed and variable rate, available. You will get a clear picture only if you will compare the same type of loans. Comparing a fixed home loan mortgage of one lender with the variable home loan mortgage of another lender will not help you. It is best if you decide which type of loan you want to take before starting the mortgage rate comparison.

Most mortgage rate comparison indicates only interest rates. However, only interest rates do not indicate the cost of a loan. There are several other fees and charges that could affect the overall cost of home loan mortgage. Some of the fees or charges that you may have to pay while taking a home loan are loan processing fee, broker’s fee, mortgage insurance, attorney’s fee, surveyor’s fee, and credit report fee. If you are looking for refinancing your home loan mortgage, then there will be closing costs that a lender will charge. It is best to take these costs in to consideration while deciding the best lender providing lowest mortgage rates.

Instead of comparing interest rates, compare APR of the home loans. Interest rates represent the rates charged by a lender on lending the money for a specific time period. APR represents the cost of loan, as it not only includes the interest rate but also other charges for getting credit.

The other important thing you should check while doing mortgage rate comparison is what is the minimum amount of down payment. You can even get 100 percent finance for your home these days, but still some lenders prefer at least 5 percent down payment. This helps them to reduce their risk in case the prices of real estate crashes.

You should pay attention to the mortgage points. These points can help you lower the interest rates on your loan. They are best for people who have low credit score or who are not paying enough down payment. In both these cases, the lenders give loans at high interest rates. In order to lower the interest rates, you can pay points. Generally, one point is equal to one percent of the loan amount. It is best to ask the lender to convert points in to dollars for easy comparison.

While doing mortgage rate comparison, you should compare the features of the home loans. The lenders offer several benefits to the home loan borrowers to attract them. Some of the popular features are early repayment of home loan without any penalty or minimal penalty, offset account that helps to reduce the interest on the outstanding loan amount, if sufficient balance is maintained in it, and so forth. These features could also add or reduce the cost of borrowing.

If the mortgage rate comparison task seems overwhelming to you, you could take the help of a professional. There are several professional mortgage brokers that help their clients in getting the cheapest and best mortgage available that suits their requirements. They will not only find the lowest mortgage rates, but will also help you understand the mortgage terms and the process of comparing and getting home loan mortgage. Though, you can do all this through online tools available, such tools compare two or more loans based on only one or two factors. Often, such comparison does not help you completely in taking the final decision. Hence, hiring a broker may be perfect for you.

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