How to Compare Mortgage Loans: Beyond the Interest Rate
Learn to compare mortgage offers using APR, closing costs, points, and total cost over your expected ownership period.
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Key Takeaways
- 1Compare APR, not just the note rate — APR includes most loan fees.
- 2Discount points only pay off if you keep the loan past the break-even month.
- 3Get Loan Estimates from at least three lenders on the same day.
- 4Match the loan term to how long you expect to own the home.
Mortgage shopping mistakes cost thousands. Lenders advertise low rates, but points, origination fees, and PMI can make the "cheapest" rate the most expensive loan over your actual timeline.
Enter both offers into our loan comparison calculator to see total cost side by side.
Compare APR, Not Just Rate
APR (Annual Percentage Rate) includes most loan fees spread over the loan term. Always request a Loan Estimate from each lender on the same day — rates change daily.
A 6.5% rate with $8,000 in fees may cost more than a 6.75% rate with $2,000 in fees over a 7-year ownership period.
Understand Points and Break-Even
One discount point costs 1% of the loan amount and typically lowers your rate by 0.25%. Points only pay off if you keep the loan long enough to recoup the upfront cost.
If you might refinance or sell in 4 years, paying $4,000 in points rarely makes sense.
Match the Loan to Your Timeline
A 30-year fixed offers payment stability. A 15-year saves massive interest but higher monthly payments. ARMs work only if you will sell or refinance before the fixed period ends.
Get quotes from your bank, a credit union, and an online lender. Negotiate — lenders often match competing offers.
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