Description: Knowing five important things would help you compare online mortgage quotes better.

5 Things you should know while comparing online mortgage quotes

Shopping around for the right mortgage to buy your home might be difficult. When there are so many lenders, you might get confused to choose one from them. You should know your mortgage to avoid any problems and it is also essential for long-term financial planning. Given below are five important points that would help you compare online mortgage quotes and make a good decision:

Type of mortgage

Are you looking for an adjustable rate mortgage (ARM) or a fixed rate mortgage (FRM)? The interest and principal payments for an FRM are uniform throughout the loan duration. Adjustable rate mortgages offer the benefit of lower rates in the beginning. If interest rates go down, you can secure an improved rate without having to bear the cost of refinancing. On the other hand, if interest rates go up, your payment and interest rate also go up. Mortgages named as hybrid ARMs blend the features of ARMs and FRMs. A 5/1 ARM, for instance, gives you the security of a fixed rate for 5 years prior to switching to a 1 year ARM.

Interest rate  

It is also known as mortgage rate and this is the rate you’re supposed to pay on your principal mortgage balance. For an FRM, the interest rate doesn’t vary. Under an ARM, the rate can vary as per the stipulations in your loan agreement. The loan documents should contain a schedule when the rates would be adjusted and how adjustments are worked out. Adjustable rate loan adjustments are calculated with the help of a particular financial index. If you choose an ARM with limits or caps, this offers you some protection from unreasonable adjustments.

APR (Annual Percentage Rate)

Interest rates shouldn’t be mixed up with APR. While comparing online mortgage quotes, you should check out the APR which incorporates all the costs of a mortgage. If two loans have equal rates, terms and similar features, compare the APR. The loan with the higher APR would be costlier. For loan with equal APRs, go for the one with the minimum upfront costs.

Features of the loan

These are the terms that affect how your loan works. For instance, if you have interest-only payments for your loan, your principal balance would not go down throughout the period you’re making interest-only payments. However, your monthly payment would be smaller throughout the initial years of your loan. The terms and conditions like these are mentioned on forms known as riders. It’s essential that you know the riders thoroughly since they explain the personalized terms of your loan. Distinct features can affect your rates, payment and balance.

Loan term    

Most mortgages are paid off over a period of 30 years. However, you can also opt for a 15-year loan. More extensive terms are also available. The smaller your term, the more you can save on interest. You can use a home loan calculator to work out possible savings between a 15 year and 30-year loan with similar features. If you can manage a bigger payment, choosing a smaller loan term can help you gain from a reduced rate.


Evaluate online mortgage quotes cautiously and ask as many questions as you can for thoroughly understanding your loan terms.