The Lowest Interest Rate Isn't Always the Best Deal

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Mortgage and Lending with WealthWise Mortgage Planning, a Division of American Pacific Mortgage Corporation NMLS #1850 NMLS 244226

The Lowest Interest Rate Isn't Always the Best Deal

 

el dorado hills mortgage

As a El Dorado Hills mortgage broker, I am sometimes asked by clients, “What is your rate?” Little do they know that I have scores of different rates offered by more than 50 lenders!  Interest rates are a very interesting subject to most people when financing a home.

 

Everybody seems to want the “best rate”. When I hear that, I sometimes ask, “What is more important to you a lower cost loan or a lower interest rate loan?” Many buyers are solely focused on interest rates without considering the closing costs and actually having enough cash to close.

 

An interest rate comes with a corresponding cost or credit.  A lower interest rate will cost more than a higher interest rate.  Let’s take a $200,000 loan amount, for example, and compare the interest rates:

 

5.0% gets (2.0%) credit ($4,000)  and a principal and interest payment = $1,073.64

4.5% gets (0.0%) credit ($0)         and a principal and interest payment = $1,013.37

 

So the question is, “Would you rather pay an extra $60 per month in payment OR come up with an additional $4,000 to close the deal?”

 

Related Posts:

 

What's the Difference Between Interest Rate and Annual Percentage Rate (APR)?

 

How Are Mortgage Rates Determined?

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