Tuesday, January 15, 2008

How to Compare Mortgage Interest Rates

Introduction

Many people going through the process of buying a home may think that the only thing they need to know about their mortgage interest rate is the monthly payment. Others believe it will take too much time to learn how to compare mortgage interest rates. Contrary to popular belief, it can be quick and easy to compare rates. Everyone wants to save money, but the purpose of shopping around for mortgage rates isn’t that simple. Do you want to keep payments super low, regardless of the principal you are paying off? Do you have a significant down payment and need a loan for less than 30 years? Do you expect to be able to pay the loan off early and want a penalty-free loan? Follow these steps to ensure that you get the mortgage loan that best suits your needs.

Instructions

Difficulty: Easy

Keep Payments Low

Steps

1

Step One

Call your bank, credit union or mortgage broker or search for interest-only mortgage rates at their Web sites (see Resources).
2

Step Two

Check out the Financial Calculators Web site with the following data points (see Resources):

- Mortgage amount
- Mortgage term
- Interest rate
- Mortgage start date
3

Step Three

Input the data and click "Calculate."
4

Step Four

Find your payment at the top of the chart.
5

Step Five

Repeat with remaining loan terms that you’ve been offered.

Compare Loans Less Than 30 Years

Steps

1

Step One

Search for mortgage rates online or contact your bank or credit union for an adjustable-rate quote.
2

Step Two

Download an amortization chart for Microsoft Excel:

- Go to the Microsoft site (see Resources).
- Choose “Templates” from the menu along the horizontal bar along the top.
- Type “Mortgage Amortization” without quotes, then click "Go."
- Click on the amortization schedule, then download.
3

Step Three

Open your Excel spreadsheet amortization schedule and input the following data points:

- Principal loan amount
- Interest rate
- Loan period
- Loan start date
4

Step Four

Repeat with the remainder of the interest rates that you’ve been offered.

Compare Traditional 30-Year Fixed Mortgages

Steps

1

Step One

Look for current rates for a traditional 30-year fixed mortgage.
2

Step Two

Visit the amortization calculator with the following data points (see Resources):

- Loan amount
- Mortgage term in months or years
- Interest rate
- Loan start date
3

Step Three

Input the data and click "Calculate." Find your payment in the field marked "Monthly Payments."
4

Step Four

Repeat with additional rates you’ve been offered.

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