How to Compare Rates for Mortgage Refinancing


If you’ve heard of Zillow, and like it, then you need to check out  A guest post from Dr. Boyer, the article argues that one can’t simply look at interest rates when considering mortgages.  Understanding other factors, like how long you intend to keep the loan, are required in order to make the right decision.

How do I compare rates to find the best mortgage?” is often the first question people ask when considering mortgage refinancing or when looking at homes for sale as investment property, a second home, or primary residence. Industry standards are evolving but it is still difficult to compare mortgage interest rates on an apples-to-apples basis between different mortgage lender loan programs.

To compare home loan rates, it is important to compare the same type of bank mortgage loan program – e.g., start with a fixed mortgage and pick a 30 year mortgage or a 15 year mortgage. Then there are three keys to evaluate the best home mortgage loan for you.

1. Home loan rate (aka interest rate) is the obvious choice because it appears simple and straight forward and dictates the monthly mortgage payment. You can use almost any good mortgage calculator to get an amortization schedule showing your loan payment as being composed of both principal payments and interest payments. Unfortunately, mortgage interest rates can be easily manipulated by allowing for lower loan rates when you pay additional mortgage points. The result was that unscrupulous lenders would advertise the lowest rate in town, drawing people in, but then smacking them with extremely high loan fees.

2. Annual Percentage Rate (APR) attempts to solve the problems of simply comparing home mortgage loan rates by including all of the lender fees to calculate the true loan rate that is effectively being charged by your mortgage broker. Per the Truth in Lending Act (TILA), mortgage lenders are required to disclose this information as the APR to give you a consistent means of comparing rates and programs. But, the APR calculations assume that you are comparing 30 year mortgage rates (or whatever your term) and that you will hold your loan until it is paid off in full.

3. Hold Time Context. Unfortunately, both current loan rates and APR comparisons are insufficient to determine whether or not the home mortgage loan being offered is right for you. Using either of these is like using a single snapshot to convey motion – you just can’t do it. The loan rate and the APR typically fail on opposite ends of the spectrum. It is necessary to understand the context in which your mortgage loans will be used. Are you likely to own the home (or loan) just a few years? Then, the higher interest rate and possibly a higher APR might be the better loan for you. Or are you more likely to hold onto it for 10+ years? In which case, paying more costs to get a lower interest rate and lower APR is likely better for you. (Please note, the number of years until a cross-over will vary with the interest rate and the loan closing costs differentials.)

You need to compare rates by manually analyzing the amortization schedule of each loan in question (identifying total principal and interest paid) or else by using a loan comparison tool that will graphically show you the time frame during which each loan is better than the other.

The best mortgage interest rate is one that fits you, regardless whether it is for a mortgage refinance, bad credit loan, or home loan mortgage. To determine the best refinance mortgage rate for you, either check the amortization schedule of each loan or use a loan comparison tool.

About the Author

Robert T. Boyer, Ph.D. is the co-founder of, the place real estate investment property search and analysis. Boyer invented the concept of Real Estate Financial Planning. He is both a licensed mortgage lender and real estate agent, living in San Diego, CA.

About the author

3 Responses
  1. I would’ve definitely thought about the first point, and maybe even the second one about total APR.

    But I probably wouldn’t have thought about the 3rd point, the total costs over time. I don’t see this one mentioned too often. Great post!

    1. Fin Engr

      @ Darren:

      Great – glad you enjoyed it and took something away. Are you currently looking to buy a home? If so, what resources are you using to research? Top Finance Blogs


SSCP   CAS-002   9L0-066   350-050   642-999   220-801   74-678   642-732   400-051   ICGB   c2010-652   70-413   101-400   220-902   350-080   210-260   70-246   1Z0-144   3002   AWS-SYSOPS   70-347   PEGACPBA71V1   220-901   70-534   LX0-104   070-461   HP0-S42   1Z0-061   000-105   70-486   70-177   N10-006   500-260   640-692   70-980   CISM   VCP550   70-532   200-101   000-080   PR000041   2V0-621   70-411   352-001   70-480   70-461   ICBB   000-089   70-410   350-029   1Z0-060   2V0-620   210-065   70-463   70-483   CRISC   MB6-703   1z0-808   220-802   ITILFND   1Z0-804   LX0-103   MB2-704   210-060   101   200-310   640-911   200-120   EX300   300-209   1Z0-803   350-001   400-201   9L0-012   70-488   JN0-102   640-916   70-270   100-101   MB5-705   JK0-022   350-060   300-320   1z0-434   350-018   400-101   350-030   000-106   ADM-201   300-135   300-208   EX200   PMP   NSE4   1Z0-051   c2010-657   C_TFIN52_66   300-115   70-417   9A0-385   70-243   300-075   70-487   NS0-157   MB2-707   70-533   CAP   OG0-093   M70-101   300-070   102-400   JN0-360   SY0-401   000-017   300-206   CCA-500   70-412   2V0-621D   70-178   810-403   70-462   OG0-091   1V0-601   200-355   000-104   700-501   70-346   CISSP   300-101   1Y0-201   200-125  , 200-125  , 100-105  , 100-105  , 1Z0-803  , 400-051   EX300  , CISM   100-105  , 000-106   400-201   642-732   220-902   70-410  , MB6-703   810-403   70-243  , CAS-002  , AWS-SYSOPS   70-462   70-410   2V0-621   LX0-103   70-461  , 220-902   1Z0-144   70-178   70-270   350-080  , 1Y0-201   1z0-808  , NSE4   102-400  , ADM-201   SSCP  , 200-125  , 640-911   000-104   640-692   300-320   350-060   000-089  , 000-017   1z0-808   700-501   1Z0-051  , 70-177   M70-101   300-209   70-461   3002   N10-006   VCP550   70-487   300-320  , 3002   700-501   NS0-157  , 1V0-601   CAS-002