Question 1

How do I compare different loan options?

Accepted Answer

To compare loans effectively: 1) Compare total cost over the loan life, not just monthly payments. 2) Calculate APR (Annual Percentage Rate) which includes fees. 3) Consider loan term—shorter terms mean less interest but higher payments. 4) Factor in your cash flow needs and financial goals. 5) Account for closing costs, origination fees, and prepayment penalties. Use our calculator to see side-by-side comparisons with all key metrics.

Question 2

What's more important: monthly payment or total cost?

Accepted Answer

It depends on your priorities. Lower monthly payments improve cash flow and provide financial flexibility but usually result in paying more interest over time. Lower total cost saves money long-term but requires higher monthly payments. If you can afford higher payments, choosing the loan with lower total cost saves thousands. If cash flow is tight, prioritize affordable monthly payments even if total cost is higher.

Question 3

Should I choose a 15-year or 30-year mortgage?

Accepted Answer

15-year mortgages have higher monthly payments but significantly lower total interest (often 50-60% less). You build equity faster and own your home sooner. 30-year mortgages offer lower monthly payments, better cash flow, and more flexibility for other investments. Choose 15-year if you can afford higher payments and want to pay off quickly. Choose 30-year if you need lower payments or want to invest the difference elsewhere at higher returns.

Question 4

How much can a lower interest rate save me?

Accepted Answer

Even small rate differences have huge impacts over time. On a $250,000 30-year mortgage, a 0.5% rate difference (6.5% vs 7.0%) saves approximately $30,000-35,000 over the loan life. A 1% difference saves $60,000-70,000. This is why shopping around and comparing rates is crucial. Use our calculator to see exact savings for your specific loan amounts and terms.

Question 5

What fees should I consider when comparing loans?

Accepted Answer

Key fees to compare: origination fees (0.5-1% of loan), application fees ($300-500), appraisal fees ($300-700), title insurance ($500-1,500), closing costs (2-5% of loan), prepayment penalties (can be substantial), and ongoing costs like PMI for mortgages under 20% down. Some lenders offer no-fee loans with higher rates—calculate which option is better based on how long you'll keep the loan.

Question 6

How does loan term affect total interest paid?

Accepted Answer

Loan term dramatically affects total interest. For a $250,000 mortgage at 6.5%: 30-year term pays $318,861 in interest, 20-year pays $198,356, 15-year pays $141,720. Doubling the term from 15 to 30 years more than doubles the interest paid. Shorter terms have higher monthly payments but save tens of thousands in interest. Choose based on your payment capacity and long-term financial goals.

Question 7

What is APR and why is it important for comparison?

Accepted Answer

APR (Annual Percentage Rate) includes the interest rate plus fees, giving a more accurate comparison of loan costs. A loan with 6% interest but high fees might have a 6.5% APR, while a 6.25% loan with low fees might have a 6.3% APR—making the second option better. Always compare APRs, not just interest rates, especially for mortgages and larger loans where fees significantly impact total cost.

Question 8

Should I refinance my current loan?

Accepted Answer

Consider refinancing when: current rates are at least 0.5-1% lower than your rate, you'll stay in your home/keep the loan long enough to recoup closing costs (typically 2-3 years), you can switch from adjustable to fixed rate, or you want to pay off the loan faster with a shorter term. Calculate breakeven point: divide closing costs by monthly savings. If you'll keep the loan longer than the breakeven period, refinancing makes financial sense.

Question 9

How do adjustable-rate mortgages (ARMs) compare to fixed-rate loans?

Accepted Answer

ARMs typically offer lower initial rates (0.5-1% less) for a set period (5, 7, or 10 years) then adjust periodically. They're beneficial if you'll sell/refinance before adjustment, rates are expected to drop, or you want lower initial payments. Fixed-rate loans provide payment certainty and protection against rising rates. In low-rate environments, fixed-rate loans are often preferable for long-term stability.

Question 10

What's the benefit of making extra payments on a loan?

Accepted Answer

Extra principal payments significantly reduce total interest and loan duration. On a $250,000 30-year mortgage at 6.5%, paying an extra $200/month saves approximately $70,000 in interest and pays off the loan 7-8 years early. Even one extra payment per year (13 instead of 12) saves thousands and shortens the loan by 4-5 years. Always specify extra payments go toward principal, not interest.

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