Checking if You Got a Good Price on Your Mortgage with Current Mortgage Market Rates

2021-08-26T14:23:35.569Z

By Sean Hundtofte

If you’re wondering if, e.g. 3% is a good rate, or whether you’re getting ripped off by a lender or broker, or just to see how good a job they’re doing, then you can compare your mortgage quote with the current market using our quick and easy to use price checker tool. This is a handy mortgage price calculator that takes your current quote on a given mortgage product, compares it to the market of lender prices (any advertised prices we find on the internet) and shows you the difference to your existing quote in up-front $.

We’ve also written a quick guide to what makes up a mortgage price and why you need to pay attention to 5 different things in your calculations (or let our calculator do that for you).

Q: How do I check if I got a good rate on my mortgage?

A: Calculate the price of the mortgage to you (interest rate + various fees), don’t just look at the rate. Use our mortgage price calculator to quickly and easily compare an all-in price to the current mortgage market.

On average in the US, mortgage borrowers lose over $5k every time a mortgage is taken out - they could have gotten the same rate from another lender at the same interest rate but with more than $5k handed to them at the closing table! The complexity of mortgage prices (that it’s not just a rate) is probably a big part of why we overpay on the typically largest dollar decision in our lives. Of course, the fact that mortgage prices are unnecessarily complex helps lenders by obfuscating the true price, and that’s where we come in to provide a mortgage price calculator to break this mortgage price comparison down for you.

Mortgage “shopping” would be a lot easier if every loan was the same and you could simply compare interest rates. But shopping for the lowest mortgage rate can quickly lead you astray on mortgages. The effective price or cost of a loan is driven by more than just interest rate. High priced lenders take advantage of borrowers who lean on the heuristic “a lower rate means a cheaper mortgage” by quoting low interest rates with high dollar fees that can surprise borrowers at the closing table. For example, in 2020 data, Quicken typically quotes a “2 point” fee to show a lower up front interest rate but with higher overall cost owing to an additional cost of 2% of loan amount. If everyone quoted a “no fee” or ”no cost” rate, it would be easy, as all the rates you see would mean the same thing. Unfortunately, while “APR”s (Annual Percentage Rate) help, they aren’t a perfect guide for figuring out the best mortgage either unless you’re definitely staying in the same home and loan for 30 years! (When the average for US households varies between 5-8 years).

So: "schmeduling" or obfuscating of the true cost of a mortgage makes it more difficult for people with limited time on their hands to shop around and compare apples to apples mortgage prices. Great for lenders, not so good for borrowers. Mortgage borrowers could be doing over $5k better if they all performed perfect price comparison and went with the lowest cost dependable lender for their situation. The fact such huge price dispersion continues to exist is a puzzle to regulators and academics (Bhutta, Fuster, Hizmo, 2019). Many borrowers give up after getting a single price quote. That’s what we’re here to help with: instantly and easily doing the shopping for you as well as assisting with a true apples-to-apples price comparison for mortgage rates.

What are mortgage prices, and what are mortgage rates?

You can think of the price or cost of a mortgage as four components:

Ongoing costs

  • Simple Interest Rate - e.g. 3% (this determines the size of ongoing monthly payments along with loan amount).

Upfront costs

  • Points or Credits - dollars you pay the lender to shift the rate up or down. Usually you are offered a range of between -3 and +3% of the loan amount to shift the rate up or down. Points are percentage points you pay to lower rate, credits are the reverse polarity (money you’re given to pay a higher rate).

  • Lender or Origination Fees - money that goes to the lender: this is another way for a lender to charge you for the loan other than the rate.

  • Third Party Costs - this money doesn’t go to the lender, but pays for additional services needed to close the loan like title insurance or appraisals. Costs can vary between lenders depending on which providers they choose.

Importantly for you, each of these elements will be quoted in extensive - possibly too extensive- detail in your Loan Estimate (LE) that a lender should give you.

Using our mortgage quote calculator and data on the current mortgage market to answer “is this a good mortgage rate?” What our mortgage price comparison tool does

  1. We automate the mortgage shopping for you and scan the internet of advertised prices.

  2. We calculate and provide an independent objective mortgage price comparison. Dollar savings seem like something everyone can understand, so we take quotes for the same mortgage rate (if available, or adjust available quotes using industry standard points/credits conversion) and show what the difference in dollars at the closing table would be for the same rate from different lenders in our “true” mortgage rate comparison calculator.

While we build out our content and automated advice, if you’re interested in more financial education around mortgages, our consumer financial protection regulator has plenty of additional material for the avid reader:

https://www.consumerfinance.gov/consumer-tools/mortgages/

By Sean Hundtofte

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