Comparing Mortgages

[John Hanson]

How do you compare one mortgage to another?
-Assume both mortgages are 15-year, conventional, fixed rate mortgages.
-Assume both mortgages will not be paid off early.

In this case, isn't APR the only thing that matters, Who cares what the interest rate is, as long the APR is lower. Is that correct? Am I missing something? Thank You!

[J Scott]

It depends on the goals of the investor. One loan could have a higher APR but a lower monthly payment (higher upfront costs that offset a lower interest rate) and another could have a lower APR but higher monthly payments (lower upfront costs that offset a higher interest rate).

If the investor was looking to optimize for monthly payment, then APR is less important than interest rate.

But, I would think that most investors would be more concerned with APR than interest rate, as that's the indicator of the overall cost of the loan...