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The Cost of Your Mortgage Loan
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Money Isn't Everything
When considering your loan application, you must factor in the level of effort, service and personal knowledge they will put into the transaction. Matrix agents have years of experience and knowledge to custom fit the loan to your personal needs. They will also select the proper lender (which bank) for your loan. This can be as critical as the loan program itself. | |
Don't be fooled.
Your loan is much more than just an interest rate and a cost.
You need to examine the loan programs that best suit your own needs.
We are commited to working with you to plan for the best program to serve your own personal needs. For instance, it's silly to get a 30 year fixed rate loan when you know that you will be selling in only another 5 years. The cost difference in those 60 months, between the rates for a 5/1 ARM and a 30yr fixed rate, will average over $100 per month on a $300,000 loan. That means you would have spent $6,000 more than you should have.
In addition, you will want to look at the real cost of "points" (explained below). The same kind of logic applies to points as with the scenario above. You can literally "buy" a better rate if you are going to stay in the home for several years. You may have "points" in the loan costs, but will be better off in the long run. We have seen this factor save our clients $30,000 to $40,000 in the course of their loan term.
But how do you determine the cost of a mortgage loan?
Shopping for a Mortgage Loan
While most buyers concentrate on interest rates, it is best to look at all the costs associated with a mortgage loan. Mortgage loans include the quoted interest rate, points and closing costs.
More than Just Interest
A number of fees are associated with the mortgage loan, including:
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Appraisal - A carefully documented opinion of value by a licensed, professional appraiser.
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Credit Report - A detailed report of your credit, employment and residence history prepared by a credit bureau.
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Principal - The amount owed on a mortgage which does not include interest or other fees.
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Document Fees, Loan Fees and Processing Fees - Miscellaneous fees charged by the lender.
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Discount Points - Points paid in addition to the loan origination fee to get a lower interest rate. (1 point = 1 percent of loan amount)
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Origination Points - the total number of points paid by the borrower at closing. (1 point = 1 percent of loan amount)
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Interest Rate - A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.
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Prepayment Penalty Mortgages (PPMs)
These loans restrict your right to prepay part or all of the principal in the loans early years. A prepayment fee is charged by the lender to the borrower who wishes to pay part or all of the loan ahead of the regular schedule. The advantage of a PPM is that they often have a lower interest rate than other mortgages.
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Using the Annual Percentage Rate (APR) to Compare Mortgage Loans
The APR was designed to help borrowers understand the relative costs of a mortgage loan. The APR takes into account the various fees associated with the loan, which is why it is often higher than the interest rate. Understand that not all lenders calculate a loan's APR in the same way. That is why this should be only one of the factors used in selecting the best mortgage for you.
Locking-in Interest Rates
Another factor to consider when doing your loan is whether the you should lock-in the mortgage's interest rate and points. Click here to learn more about lock-in options. |