It costs more to borrow less

Compared to borrowers with $400,000 home loans, borrowers with loans of $100,000 pay 10 percent more for every dollar borrowed due to higher interest rates and fees. Additionally, borrowers with small loan amounts have substantially fewer lenders willing to lend them money, according to an analysis of loan requests and quotes on Zillow Mortgages. More than one-quarter of all U.S. homes would have a mortgage of $100,000 or less if 20 percent were put down on the home.

All things being equal, including credit score and loan-to-value ratios, borrowers with small loan amounts were offered more expensive loans compared to borrowers with high loans amounts. The average interest rate offered on a $100,000 home loan in the first quarter of 2015 was 3.95 percent with an APR of 4.06 percent. The average interest rate offered on a $400,000 home loan during the same period was 3.64 percent with an APR of 3.7 percent. The larger the difference between the interest rate and the APR, the more it costs the homebuyer per dollar borrowed.

Low loan amount borrowers also had limited options for their home loan. The typical borrower seeking a loan for $100,000 received half as many loan quotes from lenders compared to similar borrowers seeking loans for $400,000.

More info here--
http://zillow.mediaroom.com/2015-05-14-It-Costs-More-to-Borrow-Less-Says-Zillow-Mortgage-Analysis

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