Introduction
Potential homeowners will typically find that different lenders will offer different rates on their mortgages.The mortgage quote you will be provided by a lender will be based on your credit score, whether you intend to live in the house, the location of the house, and the amount of money you put into the deposit. So it only makes sense to see how the mortgages compare from one lender to the next.
Step 1
As you search for the right mortgages compare, you are likely to find that there are different types of mortgage rates offered by lenders. There are two basic types of mortgages: fixed rate and variable/adjustable rate mortgages. The basic difference between the two is the interest rate charged on either one. With a fixed rate mortgage, you are guaranteed of a fixed cost in buying a house, while with a variable/adjustable rate mortgage, the interest rate is subject to market fluctuations which may make it cheaper or more expensive to buy a house, as compared to a fixed rate mortgage.
Step 2
One of the true determinants of the cost of a mortgage is the APR pegged to loan. Make sure to look at the different APR rates offered by lenders, as you mortgage compare. The monthly payments on your mortgage are a function of interest rate and the duration of the loan. Ideally, borrowers should be able to compare the different APR rates offered by lenders, and select the lowest one. Unfortunately, it is not that simple. Every lender has a unique way of computing an APR on a mortgage. So simply choosing the lowest one does not mean you have picked the best one. A better way to compare APR rates is to ask a lender for a Good Faith Estimate of closing costs.
Step 3
Make sure to mortgages compare different loan programs that cover the same duration, interest rate and rate lock duration. Pay special emphasis on loan fees, such as application fees, origination points, appraisal fees, title search, and recording and transfer charges, among others. You can ignore the fees that are independent of the mortgage, such as titles fees, homeowners insurance, escrow fees, title fees, attorney fees, and more.
Tips
If you are borrowing a big portion of the value of the house, some lenders may impose Higher Lending Charges (HLC). The charges will vary from lender to the next, but can amount to paying a premium of 10 percent of the value of a mortgage. However, not all lenders will impose HLC. So make sure to mortgages compares the different rates to get the best possible rate.
Some special deal mortgages, such as discounted rates, fixed rates and capped rates, will often require that you remain with the same lender for a set duration. Some mortgages will game the tie period with the mortgage period, while for others the tie-in period will extend further beyond this period. This can be problem if you want to refinance your mortgage or make overpayments, due to the redemption penalties involved.
