The internet has made comparing home loans more convenient, although a local bank you are already familiar with is sometimes still the best choice. A variety of characteristics involving banks and specific loan offerings should be taken into consideration when comparing them.

Some of the factors relevant to comparing different home loans include interest rates, length terms, loan types, penalties, and other repayment terms. Most loans are adjustable (ARM), fixed, or interest-only. An adjustable rate loan has an interest rate which can change, possibly adjusting the monthly payments significantly, while fixed rates stay the same, and an interest-only loan will have a lower monthly payment but can never be repaid without extra payments. Some home loan terms, usually adjustable rate, have penalties for repaying the bank early; these should be avoided if the property is to be re-sold relatively soon or the homeowner desires to make extra payments before they are due. Interest-only loans are somewhat the same as renting a house, but with greater control over it and the need to pay property taxes, insurance, and maintenance costs. Most banks offer home loans both with fixed and adjustable interest rates.

Most home loans are designed to be repaid over a fifteen or thirty year period, but 25 year, 50 year, and other length loans are also available. When comparing these different lengths, keep in mind that although the monthly payments are higher with a shorter term loan, the total amount of interest to be paid is much lower. You may have to check with a number of banks before locating those which offer 50-year or interest-only loans. Choosing a relatively small local bank has some advantages; it is more convenient, you can have a checking and/or savings account at the same bank, and you may be more valued as a customer. Different banks have varying expectations of how good your credit history/record must be to qualify for a home loan; if you are not approved for a loan, applying at different banks (rather than comparing loans with less favorable terms) may change the result. Some banks might require or allow (optionally) “points” to be paid when certain types of home loans are initiated; according to wikipedia.org, “points” are pre-paid interest and lower the amount of interest which has to be paid during the loan repayment period, but can be harmful if the home is re-sold before the same amount of interest would have been paid to the bank.

Other factors to consider when comparing home loans include the availability of automatic withdrawal (if desired), whether or not it is possible to start the application process online, and the individual bank’s late payment fees/policies.