Zillow Mortgage Marketplace Launches True Cost Calculation
By: Mary Miller, Zillow Director Product Management, Mortgages | July 23, 2009
Today, Zillow Mortgage Marketplace launched a new feature, called True Cost, that allows borrowers to make an apples-to-apples comparison of custom quotes by calculating one number that incorporates interest rate, fees, points and time.
What is True Cost?
True Cost is the sum total borrowers will pay in interest and fees during the expected time they plan to keep the loan. We call it True Cost, because it is the amount of money borrowers will never recoup. It does not include the principal accumulated, since principal is not an outright cost, but rather, it is equity that borrowers will likely get back when they sell their homes. However, we display the amount of accumulated principal as an additional number to consider, because principal will grow at varying rates depending on loan program.
Why is it important to look at a True Cost calculation?
When comparing mortgage quotes, most borrowers focus on two factors: interest rate and upfront fees. But it’s difficult to determine whether it makes more sense to choose a loan with a lower rate and higher fees, or a loan with higher fees and a lower rate. The best combination depends on how long borrowers will have the loan.
For example, a lower rate with higher upfront fees may make the most sense if borrowers keep the loan for 20 years, but low fees with a higher rate may be a better way to go if they are only staying in the home for 4 years.
True Cost calculates these tradeoffs between rate and fees and does the math for borrowers. It helps them find the least expensive loan for their expected timeframe based on rate and fees.
How does it work?
After submitting an anonymous loan request on Zillow Mortgage Marketplace, borrowers view custom quotes received from lenders on the Quotes Received page. They can use the True Cost feature by selecting how long they plan to stay in their home, and then Zillow calculates how much they will pay in interest and fees over that time period. Borrowers can click the top of the True Cost column to sort the least expensive loans for the given time period to the top of the list. They can also adjust the time drop-down to see how costs will change if they end up keeping the loan longer or shorter than they expect.
Borrowers should use True Cost as a starting point to find the least expensive loans, then use the monthly payment and fees filter to remove quotes they cannot afford. Once they narrow down to a few quotes, they can check out the lender profiles, reviews, and ratings, and then select a couple of lenders to contact.
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- Categories: Mortgages
Comments
11 Comments so far
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Jeff Corbett on July 23, 2009 7:04 am
Very useful utility, well done!
Zillow Mortgage Marketplace Adds “True Cost” to Loan Quotes | Morning Mortgage Notes on July 23, 2009 7:33 am
[...] Mary Miller, Zillow’s Director of Product Management, states in her blog post–mortgage shoppers are very focused on mortgage rates and closing fees. However, we all know [...]
Amul Raj Desai on July 23, 2009 8:28 am
I Have to congratulate the product manager Mary Miller and all the team at zillow who have worked very hard on this , I have used the app and frankly I have to say it works like a gem.
Well Done Zillow once again bringing realtors , home buyers and sellers want they need.!
Amul Raj Desai
International business development
Twitter - property1
M Realty on July 23, 2009 1:05 pm
Interesting, that could be a really powerful addition to the marketplace tool. I will have to go over and take a look.
-Tyler
Etekcapital Current Mortgage Rates on July 24, 2009 4:42 pm
[...] Divanda Mortgage It does not include the principal accumulated, since principal is not an outright cost, but rather, it is equity that borrowers will likely get back when they sell their homes. However, we display the amount of accumulated principal. [...]
How to Compare Quotes and Trade Off between Interest Rate and Fees | Free FHA Loan Advice on July 29, 2009 9:37 am
[...] at the actual price of the loan (interest paid + upfront fees) over a specific time period. This True Cost comparison is what we now offer on the custom Quotes Received page in Zillow Mortgage Marketplace. You select how long you plan [...]
Confused About Mortgages? You’re Not Alone | Free FHA Loan Advice on July 31, 2009 7:21 am
[...] to shop for a mortgage. That’s why a few weeks ago, Zillow Mortgage Marketplace rolled out True Cost Calculation, which is an apples-to-apples comparison of mortgage quotes. True Cost is the sum total borrowers [...]
100% Mortgage on August 5, 2009 4:37 am
This should prove very useful, in the cloud of mist that usually surrounds mortgage calculations, this could be very useful.
Joe Cafiero on August 11, 2009 1:19 pm
The calculation actually has errors in it and it allows the lowballers to stand out by quoting unrealistic scenarios and programs the borrower is not interested in for no other reason to be put at the top of the list. The calculation in theory is a good one but should not be used as an initial ranking of loan quotes. I would love to hear some feedback but as with our attempts on the Mortgage Thread I would imagine that none will be given
Rudi Hofmann on August 12, 2009 5:47 am
Totally “Smoke and Mirrors!” The biggest dis-service to borrowers and lenders by Zillow to date.
Loan Modification on October 6, 2009 9:35 am
What a great article. I will share this information with anyone that needs it