When shopping for a home loan, what should a borrower prioritize if they plan to pay the loan to maturity?

When a borrower plans to pay the loan to maturity, prioritizing the loan with the lowest Annual Percentage Rate (APR) is essential because the APR provides a comprehensive measure of the loan’s overall cost, including both the interest rate and any associated fees, expressed as a yearly rate. This means that the APR allows for a clearer comparison between different loan offers, as it takes into account not just the interest charged on the loan but also the impact of any closing costs, points, or other fees that can influence the total cost of borrowing over the life of the loan.

Choosing a loan based primarily on the interest rate could lead to selecting a loan that has lower monthly payments but potentially higher overall costs due to hidden fees or higher closing costs. Similarly, while the lowest closing costs might save money upfront, they do not reflect the long-term expenses incurred over the life of the loan. A shorter-term loan could come with a higher monthly payment, even if the interest rate is lower, which doesn’t align with the intention to pay the loan to maturity.

Thus, focusing on the lowest APR ensures that a borrower is making a financially sound choice that maximizes savings over the entire duration of the mortgage.