Comparing a 5.86% two-year fixed mortgage on a $605,000 New York purchase

O

OrlaIves

Buyer
Established
A revised quote has raised a different question for me. The purchase is around $605,000, with 5.86% fixed for two years, but fees and the relevant loan-to-value band make the deal less attractive than the headline rate suggested.

Should I compare the net cost through month 24, including fees and principal repaid, or give more weight to APR? If I expect to refinance, portability and early-repayment charges become important; if refinancing is unavailable or uneconomic, I need to know whether the payment after the fixed term still leaves the rental figures workable.
 
For a two-year comparison, I’d calculate the total payments plus lender fees through month 24, then subtract the principal repaid. Also compare the remaining loan balance at that point. APR is useful, but it may not match your likely holding or refinancing period. What loan-to-value band are you in, and are any fees added to the balance rather than paid upfront?
 
I agree on using a 24-month cash-cost calculation, but I wouldn’t stop there. Ask what happens after the fixed period: does the rate simply reset under the existing loan terms, or are you assuming you can refinance? Those are very different risk scenarios, especially if the rent only works at the quoted payment.
 
One caveat to Aisha’s method: subtracting principal is sensible for economic cost, but it can disguise a cash-flow problem. I’d keep two columns—actual cash leaving the account each month and the portion that builds equity. A rental can look acceptable on total cost while still being uncomfortably tight month to month.
 
I also wouldn’t give portability much value unless the written terms explain when and how it applies. A feature that sounds flexible may not help with this particular property or timeline. Early-repayment terms are more concrete for the comparison because they could affect a sale or refinance during the two-year period.
 
That distinction between economic cost and monthly cash flow is helpful. I expect to hold beyond two years, so treating refinancing as automatic would be too optimistic. I’m going back to each lender for the same set of figures: upfront and financed fees, monthly payment, balance after 24 months, early-repayment cost during that period, and the terms that apply afterward. I’ll compare them at the same loan amount rather than relying on the advertised examples.
 
That should produce a much cleaner comparison. I’d add three simple outcomes at month 24: keep the existing loan after the reset, refinance, or sell. You don’t need to predict which will happen; the point is to see which quote becomes painful under each outcome. The lowest APR may still win, but not if its fee structure or exit terms make your realistic two-year path more expensive.
 
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