When shopping for mortgages, there’s a tendency to focus on just one variable: the interest rate and most Mortgage broker focus on that. However, to make sure you’re getting the best deal on a mortgage, you’ll want to take a deeper look at both the offer and the lender behind it.
The APR: What’s in a Number?
When comparing rates, you can’t simply rely on the annual percentage rate (APR) as the indicator of how much the mortgage will cost you.
Theoretically, the APR is supposed to reflect all the costs associated with a loan and make it simple to compare offers from different institutions. Unfortunately, lenders have a lot of flexibility in deciding which fees to include when calculating the APR. That means it’s easy for some to conveniently omit a few charges and make their APR look lower than competitors.
For a deeper dive into the expenses, ask to see the Mortgage broker‘s loan estimate, formerly known as a good faith estimate. It’s an itemized list of all the fees they’ll charge you, including those that may have been factored into the APR calculation.
How Long Does the Rate Last?
There are two basic types of mortgages: fixed rate and adjustable rate. As the names imply, a fixed-rate mortgage locks in your interest rate for the life of the loan, while the interest on an adjustable-rate mortgage (ARM) is normally fixed for a limited amount of years, then rises and falls with trends in the markets.
If the starting rate is locked in for five years and you plan to sell the home in three or four years, the lower initial rate on a Mortgage broker ARM may be a wise move. However, if you hope to stay in the home longer than that, a fixed-rate mortgage may save you money in the long run. Read more.
Focus on the Actual Monthly Payment
The amount you pay monthly is the bottom-line impact on your situation. While interest rates may be close, the cost for private mortgage insurance (PMI), points and other fees can vary between lenders, significantly impacting your monthly payment. The lender costs in your monthly payment include:
- Interest — determined by the rate of the loan
- PMI — usually required if your down payment is less than 20% of the purchase price
Part of your payment may also include property taxes and homeowner’s insurance, but those costs aren’t controlled by your Mortgage Broker.
So, when comparing lenders, if the lower interest rate you’re getting with Lender A saves you $20 a month, but PMI costs $60 a month more than it does with Lender B, then the lower interest rate isn’t the best deal.
There’s more to a mortgage than just numbers. Beyond the mortgage math, you should also evaluate a prospective lender’s reputation for customer service. After all, a lower rate isn’t much consolation if the lender isn’t ready on closing day or otherwise jeopardizes your deal.
Quality counts long after closing, too. By its nature, a mortgage is a high-dollar relationship that will last years or even decades. Some lenders will sell the servicing rights of your mortgage to another company, so be sure to ask if your lender will keep control of your Mortgage broker servicing. For more details, visit : http://www.mortgagebroker247.com.au/homeloans/