How to Do a Mortgage Comparison

Mortgage comparison is the process of comparing and evaluating home loan offers to find the best fit for your individual needs. Whether you’re a first-time homebuyer or just refinancing, this step in the process should be treated just like any other major financial decision.

Compare Your Loan Options
Once you know how much home you can afford and have your deposit ready, the next step is to choose a mortgage lender. There are various types of lenders such as direct, credit unions and online lenders; each offering their own mortgage products and rates. Research all of your options thoroughly and consult with an experienced adviser before making any final decisions as lenders often make major differences in the type of mortgage they provide.

Utilize a Mortgage Calculator to Understand Your Monthly Payments and Total Cost
A mortgage calculator is an invaluable tool for estimating how much you can borrow, your monthly payment amount and repayment term. Simply input your desired interest rate and loan term into the calculator, along with any associated costs like closing fees or points (which are paid extra to the lender to reduce your rate).

The mortgage calculator also allows users to compare the total cost of two loans based on different interest rates and loan terms. For instance, they can compare 30 year versus 15 year mortgage payments.

Interest Rate and Annual Percentage Rate (APR) are crucial tools in calculating the total cost of your mortgage, particularly when looking into adjustable-rate mortgages (ARM) or hybrid ARMs with fixed rates for part of their life. The APR takes into account lenders’ risk in lending you money, assuming that you will stay with it throughout its full duration.

Consider Your Creditworthiness
Mortgage lenders base their loan offers on your credit report. If there are any issues with it, it’s essential that you rectify them prior to applying for a loan.

With a good credit score, mortgage lenders are more likely to offer you an advantageous interest rate. Even a slight rise can add up to substantial savings over time.

Request a Lender Fees Worksheet
Before signing any contracts, request a mortgage quote or Lender Fees Worksheet from each lender. These documents will give you insight into what each lender charges you and can serve as useful reference when looking into interest rates and loan terms.

Selecting the Right Mortgage
Fixed rate loans are the most popular mortgage type, offering a consistent principal and interest payment over its duration. On the other hand, variable-rate mortgages may fluctuate with changes in the market.

When looking into fixed rate mortgages, it’s wise to request quotes from multiple lenders so you can compare rates side by side. Furthermore, using a loan comparison calculator will allow you to assess which types of mortgages would best fit into your budget both now and in the future.