Comparing Mortgage Loans
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What should you consider when you compare mortgage loans?
Often when people compare mortgage loans, they simply look at the interest rate they're going to be locked into and use that data as the sole basis for comparison. But when you compare mortgage loans based on interest rate alone, you miss out on many other variables that should weigh in on your decision. These variables include:
- Closing costs: Closing costs can add an extra sting to your loan expenses, and since they're often added to the principal of your loan, they can accrue interest. When you compare mortgage loans, be sure to ask about closing costs and find out if they can be reduced in any way.
- Lock-in fees: Lock-in fees are those fees charged to lock in your proposed interest rate so that it can't be increased while you're still in the application phase of the lending process. These fees vary from lender to lender and should be negotiated and considered when you compare mortgage loans.
- Prepayment penalties: Some loans have a built-in penalty that kicks in if you pay your loan off early. When you compare mortgage loans, be sure to compare prepayment penalties as well. If possible, choose a lender that doesn't penalize you for paying off your mortgage early.