Why Is Comparison Rate So Much Higher?

Comparison rates can be difficult for some of the mortgage brokers’ existing and potential clients to properly understand, which is why it is important for mortgage experts to be familiar with the key components of comparison rates and why they are helpful for current and potential homeowners during their borrowing process. 

A home loan or mortgage agreement with a comparison rate that appears to be on the higher end of the cost scale may be the result of a loan with high-interest rates, fees, and costs. In opposition, a loan with a comparison rate that appears to be lower can indicate that the loan is comprised of low-interest rates, fees, and costs. 

A comparison rate allows potential and existing clients to easily identify a home loan’s total cost, compare the comparison rate with other home loan offerings, and obtain a better understanding of how a home loan’s total cost compares to its interest rate. 

Comparison rates are calculated by adding the various rates, fees, and charges of a home loan and turning the calculated result into a percentage that indicates the home loan’s complete price. 

It is essential for clients to be made aware of the various other factors that can increase a home loan comparison rate, including the individual’s personal debts owed, credit score, financial or repayment histories, as well as their current income and financial status. 

If a client has any further questions about comparison rates and how they are calculated, we recommend that they reach out to their current mortgage broker to learn more!