Searching for Mortgage Rates-How to Utilize the Internet

1. Organize Your Information

Before diving into mortgage rate comparisons, it’s essential to organize your data. Creating a comparison database using a tool like Microsoft Excel can help you efficiently track and compare different mortgage options. Your database should include:

• Mortgage Type: Adjustable Rate Mortgage (ARM), Fixed Rate Mortgage, Balloon Mortgage, etc.

• Interest Rate Overall: The total interest rate being offered.

• Index Rate: The baseline rate used by lenders to determine your interest rate.

• Lender's Margin: The percentage added to the index rate by the lender.

• Term of the Mortgage: The length of time for which you’ll be paying the mortgage.

• Additional Features: Any features that might affect your financial situation, such as prepayment penalties or adjustable rate caps.

2. Compare Interest Rates

Interest rates can vary widely, so understanding how they work is critical:

• Index Rates: Common indexes include:

  • One-Year Constant Maturity Treasury Securities (CMT)

  • Cost of Funds Index (COFI)

  • London Interbank Offered Rate (LIBOR)

  • Lender’s Own Cost of Funds

• Lender’s Margin: This is a percentage point added to the index rate to determine your final interest rate. It ensures the lender earns a profit from your mortgage.

3. Evaluate Adjustable Rate Mortgages (ARMs)

Adjustable Rate Mortgages often have lower initial rates compared to fixed-rate mortgages, but they come with specific factors to consider:

• Payment Cap: The maximum amount your monthly payment can increase.

• Interest Rate Cap: The maximum interest rate that can be charged over the life of the loan.

• Margin: The percentage added to the index rate to determine your interest rate.

• Adjustment Frequency: How often the interest rate will be recalculated.

• Prepayment Penalties: Fees charged if you pay off your mortgage early.

• Duration of Stay: ARMs are generally better for those who plan to move or refinance within a few years.

4. Use Online Tools and Resources

The Internet is a valuable resource for comparing mortgage rates:

• Search Engines: Use search terms like “mortgage rates comparison” to find a range of options.

• Mortgage Comparison Websites: These sites aggregate rates from various lenders, making it easier to compare offers.

• Referrals and Recommendations: Ask friends, family, and realtors for recommendations on reliable mortgage lenders.

5. Analyze and Decide

Once you’ve gathered information on various mortgage rates:

• Review Your Comparisons: Look at the total costs, including interest rates, margins, and any potential fees or penalties.

• Consider Your Long-Term Plans: Your choice may depend on how long you plan to stay in the home and whether you anticipate needing to refinance.

• Consult a Financial Advisor: If you’re unsure about any aspect of the mortgage or need help interpreting the data, a financial advisor can provide expert guidance.

Conclusion

Finding and comparing mortgage rates online allows you to make informed decisions and secure the best deal for your home loan. By organizing your data, understanding the different types of mortgages, and using online resources effectively, you can navigate the mortgage market with confidence and potentially save a significant amount of money.