Mortgage rate, the basic primer
The interest rate is the most important variable in determining the total cost of a loan, so a lower interest rate usually adds up to considerable savings. However, if a new mortgage offers a lower monthly payment, but the interest rate is no lower than the old mortgage's interest rate, the new mortgage will have a higher total cost. This effect can be seen in mortgages that have a higher interest rate but drop the monthly payments by extending the term of the loan. This type of loan should be chosen only when the homeowner is having difficulty making higher payments at the moment, but foresees being able to pay more per month in the future. Another consideration is whether there are "hidden" fees associated with either the new or the old mortgage.