Put mortgage to 'time horizon cost' test

Part 4: Changing the way people buy mortgages

Previous articles in this series focused on how certified lender networks will generate competitive pricing of both mortgage loans and the third-party services that are required accessories of mortgage loans. The focus of this article is the critical role of the networks in providing decision support, which is one of the weakest parts of the existing system.

Decisions borrowers must make

Decision support means helping borrowers make a series of complex decisions. These include the type of mortgage, in which borrowers must choose between the stability of a fixed-rate loan and the lower rate but greater risk on an adjustable-rate loan. They also must decide how much to put down, whether to pay points to reduce the rate, and, if mortgage insurance is required, the best type of premium plan.

On refinances, there is the overriding issue of whether the refinance will save them money or reduce their risk.

Rational decisions are borrower-specific