A Few Tips For Comparing Interest Rates

  • Do not factor the prepaids or reserves when shopping rates. Do check to see if the mortgage originator is properly disclosing them. However, they are not an actual “closing cost”. The mortgage originator does not have control over how much your property taxes or home owners insurance is. If you’re doing a refinance and have an existing reserve account, it is typically refunded to you by the mortgage servicer a few weeks after closing.
  • Compare the net closing cost with the interest rate. Your net closing cost will be discount points plus closing cost OR it will be closing cost minus the rebate credit.
  • Mortgage rates change constantly – sometimes several times a day. Make sure you try to get the quotes at the same time. Shopping one lender on Monday morning, another on the afternoon and one on Tuesday is not comparing rates “apples to apples”. Mortgage rates are based on mortgage backed securities (bonds) and pricing moves similar to the stock market.
  • Compare by the same lock period or a lock period that is appropriate for your scenario. For example, if you’re comparing a refinance where you’re paying off your second mortgage and one where you’re going to subordinate the second mortgage – subordinations tend to require a much longer time period.
  • Make sure that you provide enough information for the mortgage originator to provide an accurate quote.

Of course, until you’ve locked in an interest rate, it’s subject to (and will) change or at least the pricing (rebate credit or discount cost) will change. Sometimes the change is very slight and other times, not so slight.