MORTGAGE LOAN

Phase 2 Individual Project

Phase 2 Individual Project

Introduction

Mortgage credit is a credit that is secured by a mortgage. This mortgage can be taken on the property or to purchase a property already acquired by the applicant. The mortgage is most of the time taken in the first place; this involves the recovery and the refinancing of an existing loan on the existing property.

This paper compares the APR and EAR on the mortgage rates of five companies. This paper also addresses the fundamental mistakes home buyer makes when looking at quoted mortgage rates, and the implication of EAR on the overall cost to the home buyer. Companies included in the analysis are Lending Tree, Amerisave, Quicken Loans, IHL Direct, and Close Your Own Loan.

Mortgage Rates

Quoted mortgage rate of the companies for the term period of 10 years, 15 years, and 30 years are as follows.

Lender Title

Time to Maturity

APR

Lending Tree

10 Years

NA

 

15 Years

2.88%

 

30 Years

3.75%

Amerisave

10 Years

NA

 

15 Years

2.75%

 

30 Years

3.75%

Quicken Loans

10 Years

3.25%

 

15 Years

3.25%

 

30 Years

3.99%

IHL Direct

10 Years

3.25%

 

15 Years

3.25%

 

30 Years

3.75%

Close Your Own Loan

10 Years

3.25%

 

15 Years

3.25%

 

30 Years

3.75%

NA = Not available

Effective Annual Rates EAR Conversion

Lender Title

Time to Maturity

APR

EAR

Lending Tree

10 Years

NA

NA

 

15 Years

2.88%

2.92%

 

30 Years

3.75%

3.82%

Amerisave

10 Years

NA

NA

 

15 Years

2.75%

2.79%

 

30 Years

3.75%

3.82%

Quicken Loans

10 Years

3.25%

3.30%

 

15 Years

3.25%

3.30%

 

30 Years

3.99%

4.06%

IHL Direct

10 Years

3.25%

3.30%

 

15 Years

3.25%

3.30%

 

30 Years

3.75%

3.82%

Close Your Own Loan

10 Years

3.25%

3.30%

 

15 Years

3.25%

3.30%

 

30 Years

3.75%

3.82%

NA = Not available

Analysis of Rates based on APR and EAR

Above data calculation shows that Amerisave is offering the cheapest rate for 15 Year mortgage. Amerisave is not offering 10 Year mortgage loan; whereas, EAR being charged by Amerisave from the borrowers is minimum than other companies include in the analysis. Minimum EAR rate of 2.79% shows that borrowers taking 15 year mortgage loan from the Amerisave will pay minimum loan at the time of maturity. Most expensive rate on the mortgage loan is being charged by Quicken Loans on 30 Year mortgage loan, which is 4.06%.

All companies included in the analysis offering equal mortgage rate for 10 year, except Amerisave and Lending Tree. These two companies are not providing 10 year mortgage loan to borrowers. This shows that no difference arise if borrower take 10 Year mortgage loan from any company; he will incur equal cost in terms of interest charges based on the EAR.

Solely based on the EAR, data comparison shows that rates offered by Amerisave for 15 Year mortgage are cheapest compare to other companies included in the comparison. Second lowest cheapest rate is being offered by the lending tree.com, which ...