A recent study conducted by LendingTree revealed that although 79% of Americans considered themselves to be savvy shoppers and 92% do some sort of online research on the best price prior to purchasing items, only 30% said they do the same when shopping for a loan. Just like with other, smaller purchases, it pays to shop around for your mortgage.
80% of Americans will drive out of their way to save a few cents on gasoline, 92% will shop online and 56% will spend the time visiting multiple brick and mortar stores to determine the lowest price for a product they want to buy. But, when it comes to choosing the best home or auto loan, these practical saving strategies fall by the wayside. LendingTree’s study showed that only a third of those surveyed always shop around for the best rates while 18% never conduct any research into the best loan options.
“It’s an interesting phenomenon. Consumers are generally very savvy with their shopping behavior when it comes to day-to-day purchases and material goods. But, once it comes to a major financial investment, we don’t see the same rational pattern of behavior and mentality for saving,” states LendingTree consumer savings expert, Andrea Woroch. “Consumers may be too focused on price or the monthly payment and fail to consider the lifetime cost of interest which can add up quickly. Over a five-year auto loan, or 30-year mortgage, a 1% difference between interest rates can easily translate to thousands of dollars.”
Possible causes may be that consumers may not fully comprehend how to equate loans in an apple to apples comparison. Many simply don’t understand the intricacies of costs associated with compounding interest and the time-value of money. This can result in consumer frustration when trying to research and compare loans. But not taking the time to do research can mean paying dramatically more over the life of the loan.
When it comes to choosing a mortgage, it is recommended to shop at least five different lenders. Or, enlist a trusted financial advisor that can assist you in finding the best option for your financial situation. They can better explain the pros and cons as well as help minimize the frustration or emotional component of choosing a home mortgage, saving you a considerable sum over the life of the loan and possibly allowing you to afford that dream home in Menlo Park.
For more information on how to shop mortgage loans, click here.