I used to work in the mortgage business and one way that I used to help my clients comparing mortgage options is "total cost analysis". Most people only pay attention to the interest rates and monthly payments; however, when you have mortgages with different terms, such as 30 yrs vs. 15 yrs and fixed vs. variable rates, you need a better way to compare the different options. Calculate the total costs for each mortgage option, such as interests, closing costs, etc. over a period of time and see which option costs the least.

One other thing to add: When considering the different mortgage options, it is very helpful if you know how long you plan to own that home. You can then calculate the total costs during that period of time and find out which loan option is the least costly one.

If you want to take this a step further, when you look at different mortgage options, look at the equity that you will have after certain periods. The mortgage options that give you the most equity is the one that you seriously consider. Let's say you expect to be in this home for 10 years, so you would look for the mortgage option that give you the most equity at the end of 10 years.

I've been asked how do we calculate total costs for adjustable rate mortgages. The simple answer is you can't since no one knows how the rate will be adjusted. What I did for my clients was that I would give them 1) the worst-case scenario, 2) the best-case scenario and 3) an educated-forecast-scenario.

Most of the time people with ARM do not expect to keep it for a long time - they either will sell the properties after a few years or refinance with a fixed rate mortgage. For this reason, the variables are limited to only a few years so the total cost calculation is still "usable".

A 4 post conversation with yourself Stevenl? This sure feels and looks like a spam thread.

Yep, I feel the same way. I left the mortgage business a few months ago so I've been posting what I did with my clients as I have the time. I'll delete some posts.