Mortgage Rates Comparison Sites – Do They Give You the Whole Story?

If you are contemplating your first mortgage as a first time buyer, or a remortgage of your existing loan, you would probably think that researching the best mortgage rates would be as simple as going to the nearest price comparison site, answering a few straightforward questions and applying a few filters to suit your mortgage rate requirements.

Now for price comparison sites that make millions from online financial arrangements, that view is one that they try to foster, indeed actively promote. Why wouldn’t they? It makes them millions. Giving advice requires expertise, time effort, adherence to strict Financial Services Association rules, and above all a desire to really make sure the most appropriate advice is provided, even if the advice means no income is generated for the adviser.

Oh, but that doesn’t make money. Far easier to place the decision with the client, and allow them to make the decision. Now I’m all for people power, and people taking responsibility for their own actions, but does it make sense for the largest financial commitment most of us ever consider to come without even the smallest amount of mortgage advice.

Having spent more than ten years providing mortgage advice online talking to people from all walks of life, I am of the firm believe that advice should be made compulsory. All too often I have seen the consequences of an ill considered decision causing problems later on. Mortgage rates believed to be fixed only to turn out to be a discounted rate, where the mortgagee misunderstood that the discount rate was fixed, not the actual pay rate. Those with extended redemption penalties that they had just not realized were present because they hadn’t read the documentation correctly. They were only really concerned about the monthly payment.

Well if you are considering a mortgage, and what mortgage rates will be suitable, my advice would be that you talk to an Independent Financial Adviser. Fee or no fee, seeking advice will always save you money in the long run.

For those that don’t feel professional advice is for them, perhaps just consider the following points when mulling over which mortgage rates are best for you.

Attitude

Do you have a real understanding of the differences between the different types of mortgage rates? Has media hype, adverse publicity or the advice of friends lead you to discount a particular type of mortgage that may be suitable for your needs.

Changes in Circumstances

Do you know what you will be doing in two, three, five or more year’s time? Do you plan to start a family? Is there any expectation that your income may go down? Do you expect a promotion, relocation, and if you did, would you retain the property and let it out lender permitting, or sell it? Might you move abroad, and would that impact on the mortgage repayment type considered?

Early Repayment Charges

Does the mortgage have one, and if so is it just during any product period such a three year fixed rate, or does the penalty extend beyond the benefit period leaving you with the prospect of paying the generally higher lender standard variable rate, or the payment of a penalty which is often equivalent to six months interest?

Can the mortgage be transferred to a new property without incurring the redemption penalty?

Portability

Whilst most mortgage rates are portable to a new property some are not. For those that are you should be aware that portability is not a ‘Right’, but rather just a feature of the mortgage product. To transfer a mortgage to a new property you will still need to meet the lenders underwriting criteria again, and the property will still have to be a suitable security. Also consider the repayment method you select. If you expect to move frequently, is a repayment mortgage advisable? Or would you be better of with an interest only loan and a savings plan that is independent of the mortgage?

Overall APR / Cost for Comparison

Which mortgage is the cheapest, and how do you assess it? Is the cheapest mortgage the best mortgage, after you take all the other factors into consideration? Total cost comparison is a good place to start however. Beware though, as this is the one calculation that many online mortgage sourcing systems do not provide. Comparing the total cost over a given period which includes all the relevant fees and charges will provide a list of products in total cost order. Whether the one at the top is the most appropriate mortgage is a different question.

Affordability

The monthly payment is always a major consideration. Typically a two year discount or tracker mortgage rate will provide the lowest overall cost over that period. Fixed rate security often comes at a premium. Would it be cheaper if interest rates were to rise? How much could they rise before the fixed rate mortgage becomes a better option? And more importantly if they were to rise at what point would the loan become unaffordable?

Flexibility

Does the mortgage allow for overpayments or underpayments where an overpayment has been made? Will it allow for the offset of mortgage interest against a linked savings account? Can you switch from repayment to interest only in the event of financial difficulty? Can you select if overpayments will reduce the term or the monthly payment?

The above are just a few considerations, and can often leave you more confused than before you started, and this is often when the lowest monthly payment becomes the main factor for mortgage rates selection.

The reality is that most mortgage rates are unable to satisfy all your needs, and seeking advice ensures you know which mortgage rate is the most appropriate for your needs having considered all the important factors.

How You Can Learn to Predict Mortgage Rates, Too

How you can learn to predict mortgage rates, too.

Many people, particularly, first-home buyers, tend to shop around for the cheapest mortgage rate that they see not knowing, or understanding, that these rates dip and fall. If you get an understanding of how mortgage rates work, you will be in a far better position to land one that really works for you and may even be cheaper than the one you’re ready to commit to, say, today.

Here’s how mortgage rates work.

The firs thing you should know about these rates is that they are unpredictable. They change. A high rate today may be low tomorrow. At one time, these rates were more stable. They were set by the bank. But since the 1950s, Wall Street took over and adjusted them according to supply and demand. Or more accurately, Wall Street linked them to bonds. So that when bonds – that are bought and sold on Wall Street – drop, mortgage rates do, too.

How can I know today’s bonds rates?

It sounds simple: let’s keep up with the prices of bonds and we’ll know when to shop for our mortgage. Unfortunately, only Wall Street has access to this knowledge (called “mortgage-backed securities” (MBS) data). And they pay tens of thousands of dollars for access to it in real-time.

Here’s how you can make an educated guess:

Calculate according to, what’s called, the Thirty-year mortgage rates.

These are the events that lower rates in any given 30 years:

  • Falling inflation rates, because low inflation increases demand for mortgage bonds
  • Weaker-than-expected economic data, because a weak economy increases demand for mortgage bonds
  • War, disaster and calamity, because “uncertainty” increases demand for mortgage bonds

Conversely, rising inflation rates; stronger-than-expected economic data; and the “calming down” of a geopolitical situation tend to elevate rates.

The most common mortgages and mortgage rates

You’ll also find that mortgages vary according to the level of your credit rating. The higher your credit score, the more likely you are to win a lower mortgage rate.

Mortgage rates also vary by loan type.

There are four main loan types each of which has a different level of interest. In each case, this level of interest hinges on mortgage-secured bonds. The four loan types together make up 90 percent of mortgage loans doled out to US consumers.

Which mortgage loan do you want?

Here is the list:

1. Conventional Mortgages – These loans are backed by Fannie Mae or Freddie Mac who have set regulations and requirements for their procedures. The Fannie Mae mortgage-backed bond is linked to mortgage interest rates via Fannie Mae. The Freddie Mac mortgage-backed bond is linked to mortgage-backed bonds via Freddie Mac.

Mortgage programs that use conventional mortgage interest rates include the “standard” 30-year fixed-rate mortgage rate for borrowers who make a 20% downpayment or more; the HARP loan for underwater borrowers; the Fannie Mae HomePath mortgage for buyers of foreclosed properties; and, the equity-replacing Delayed Financing loan for buyers who pay cash for a home.

2. FHA mortgage – These are mortgage rates given by the Federal Housing Administration (FHA). The upside of these loans is that you have the possibility of a very low downpayment – just 3.5%. They are, therefore, popular and used in all 50 states. The downside is that the premium is split in two parts.

FHA mortgage interest rates are based on mortgage bonds issued by the Government National Mortgage Association (GNMA). Investors, by the way, tend to call GNMA, “Ginnie Mae”. As Ginnie Mae bond prices rise, the interest rates for FHA mortgage plans drop. These plans include the standard FHA loan, as well as FHA specialty products which include the 203k construction bond; the $100-down Good Neighbor Next Door program; and the FHA Back to Work loan for homeowners who recently lost their home in a short sale or foreclosure.

3. VA mortgage interest rates – VA mortgage interest rates are also controlled by GMA bonds which is why FHA and VA mortgage bonds often move in tandem with both controlled by fluctuations from the same source. It is also why both move differently than conventional rates. So, some days will see high rates for conventional plans and low rates for VA/ FHA; as well as the reverse.

VA mortgage interest rates are used for loans guaranteed by the Department of Veterans Affairs such as the standard VA loan for military borrowers; the VA Energy Efficiency Loan; and the VA Streamline Refinance. VA mortgages also offer 100% financing to U.S. veterans and active service members, with no requirement for mortgage insurance.

USDA mortgage interest rates – USDA mortgage interest rates are also linked to Ginnie Mae secured-bonds (just as FHA and VA mortgage rates are). Of the three, however, USDA rates are often lowest because they are guaranteed by the government and backed by a small mortgage insurance requirement. USDA loans are available in rural and suburban neighborhoods nationwide. The program provides no-money-down financing to U.S. buyers at very low mortgage rates.

Mortgage rates predictions for 2016

Wondering what your chances are for getting a mortgage for a good rate the coming year? Wonder no further.

Here are the predictions for the 30-year trajectory:

  • Fannie Mae mortgage rate forecast: 4.4% in 2016)
  • Freddie Mac forecast: 4.7% Q1 2016, 4.9% Q2 in 2016
  • Mortgage Bankers Association (MBA) forecast: 5.2% in 2016
  • National Association of Realtors (NAR) forecast: 6% in 2016.

In other words, mortgage rates are projected to rise slightly in 2016.

Ten Questions to Establish a Mortgage Loan Broker Has the Refinance Mortgage Broker Service for You

1. What array of lenders do you as a Mortgage Loan Broker have on your lending panel?

Make sure that the broker you are dealing with is a Mortgage Loan Broker or Mortgage Planner who has access to a variety of lending institutions as opposed to a Mortgage Representative who only represents one lender and that lender’s range of products.

2. What is the best type of Home Loan that would suit my cashflow cycle and finance structure?

Make sure that the Refinance Mortgage Broker or Mortgage Planner demonstrates how the specific type of home loan will sustain your finance structure and maximise the use of your cashflow. It is vital that the method in which the loan payments are required to be made doesn’t limit the effective usage of your cashflow in minimising the amount of home loan interest payable.

3. Is it best to concentrate on the mortgage products with the cheapest mortgage interest charge?

If the response is an explicit yes, inquire as to why and move forward with caution! There is nothing wrong with cheap home loan interest rates provided the lending institution displays a track record of cheap interest rates and established funding! Mortgage products that appear to give a great deal may include high penalties, charges and costs, or may not offer the versatility of usage that you call for in the future. To prevent selecting a loan you could later regret, treat with caution a recommendation centred mainly on cheap interest charges.

4. What are the best home loan products to suit my direct circumstances and objectives, and how will they support any future plans I may have?

Make sure the Mortgage Loan Brokers proposal consists of no less than 3 home loan products that display fair comparisons among the products. Beware of a comparison that includes 1 product that seems to be far better than the other 2! Look for product features and product versatility that will permit you to amend the home loan product to meet your future ambitions and plans.

5. Aside from the fees and charges associated with the new home loan, what further fees and charges am I likely to incur?

Finance Institutions, Service Providers and Government Departments often charge costs connected with the financing procedure and often they may be a pricey surprise for the unwary. A valuable Mortgage Loan Broker or Mortgage Planner will provide you with a Loan Costing Sheet itemising all costs, charges & fees associated with the anticipated home loan procedure.

6. How do you get remunerated and what is your commission arrangement?

Asking for an explanation in writing of how your service provider gets paid for their act will assist recognize and reduce conflicts of interest. If the suggested Lender’s commission is by far the uppermost remuneration of all credit providers on the broker’s lender panel, proceed with caution as this may stand for a conflict of interest.

7. Do you provide your potential customers with a Mortgage Broking Agreement?

Not every Refinance Mortgage Brokers service is precise in what it will deliver as opposed to what it is that you want as a final product. Hence it is highly recommended that a Mortgage Broking Agreement be drawn up among the parties outlining the scope of services/products to be offered and payments associated with the work.

8. Do you perform FREE Yearly Reviews and what extra services do you give?

Discover how eager the broker is to remain in contact with you and confirm that your loan is satisfactorily ongoing meeting with your goals. What extra services does he or she give either directly or via referral that might possibly be of benefit to you and are there savings on hand if you bundle these services with that of the mortgage?

9. Where may I turn if we have a disagreement that cannot be sorted out?

Do you offer an External Dispute Resolution Service (EDRS)? Request the service provider to clarify the complaints process offered by their business, outlining who you might complain to and which EDRS they are a member of? A worthwhile Refinance Mortgage Broker will provide you with a personalised Financial Services Guide at initial meeting that will outline all the particulars of their complaints process as will their Mortgage Broking Contract.

10. Are you an MFAA certified Mortgage Loan Broker?

By dealing with a broker who is a certified MFAA member, you are doing business with a person that has fulfilled minimum standards of education, experience and ethics to sustain their membership status.