Are you searching for the lowest daily mortgage rates for your next home loan? Finding the lowest purchase and mortgage refinance rates from the best mortgage lenders isn’t difficult; however, avoiding unnecessary fees can be tricky. Here are several tips to help you get the lowest daily mortgage rates without paying unnecessary discount points or lender junk fees.
Shopping for the Lowest Daily Mortgage Rates
Most lenders like Amerisave publish daily mortgage rates online along with the Annual Percentage Rate (APR). Many homeowners rely on APR to compare daily mortgage rates across lenders; however, this is a common mistake that can cost you thousands of dollars. The reason Annual Percentage Rate is not going to give you apples-to-apples comparisons of different lenders is that it relies on a flawed calculation based on bad assumptions.
Beware Your Lender’s Annual Percentage Rate
Banks and mortgage lenders calculate APR by taking your loan size, factoring in prepaid items with closing costs and averaging the payoff over 30 years. Banks love to brag about their low APR mortgage loans. Home loans with the lowest APR will often show up first in the list of daily mortgage rates.
The problem with these “low APR” home loans is that they often have the highest out-of-pocket fees at closing. Here’s three assumptions lenders make rendering the Annual Percentage Rate all but useless:
- You will keep the mortgage for thirty years.
- You’ll never pay anything extra on the principal balance
- You’ll never sell or refinance your home again
One dirty trick lenders use to make their home loans more attractive is to load them up with discount points. If you compare two mortgage refinance rates, one with and one without points, the one with the points will have higher closing costs. Because this home loan’s interest rate is lower and spread out over thirty years, it will have a lower APR than the zero point mortgage.
If you’re choosing from a list of daily mortgage rates with the lowest APR you could be walking away with the highest closing costs.
This is what makes Annual Percentage Rate worthless unless you keep the same home loan for thirty years. Picking your next mortgage by APR will front-load your home loan with unnecessary fees.
How to Get the Lowest Daily Mortgage Rates
The best advice I can give you for finding the lowest purchase and refinance rates for your next home loan is to ignore APR completely. The better way to comparison shop is to look at interest rates compared to closing costs.
The more you pay at closing, including unnecessary discount points and junk fees, the more difficult it’s going to be recouping your out-of-pocket expenses. Mortgage rates are at near 60 year lows making discount points an unnecessary expense.
Don’t let a fast-talking loan officer dupe you into paying more than you need to at closing.
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You can learn more about getting the lowest daily mortgage rates without paying lender junk fees by checking out my free Underground Mortgage Videos.
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My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
This is comprehensive info I was looking for. Want to refi but dreading swimming w/sharks. Video 4 taught me more in couple min time than all the many articles I’ve read. Going to check out all other tutorials on this site b4 I talk to mort. Broker again. Unclear on one particular point. When ask mort broker if close on Mort in own name answer is what?