APR mortgage calculator

Shopping for a mortgage is quite a tedious job. It’s because different lenders term for their fees by different names as a reason comparison becomes quite difficult. Most borrowers compare the interest rates so as to choose the best loan. APR (Annual Percentage Rate) is a better rate of comparison as this will take into accounts the lenders fees along with the interest rate. Sometime to lure customers lenders offer loan with lower r4ate of interest but charges higher upfront fees. These can turn out to e costlier than that of the loans with higher rate of interest. APR will let you know the true cost of borrowing and it will be better if you can compare the APR of the lenders while taking out a mortgage. 

APR mortgage calculator
  
How an APR difference from interest rates?

The rate of interest is the percentage of the loan amount that a lender will charge you for borrowing the dollars. APR is calculated by adding the interest amount with the lenders upfront fees, other origination fees. This is expressed in a yearly percentage of the loan amount. Since all the costs are considered APR will be higher than the normal rate of interest.

4 Limitations of using APR:

1) Third party fees are excluded while calculating the APR. Home appraisal fees, home insurance and title fees are usually not taken into consideration when Annual Percentage Rate is calculated, but they usually add up to a significant amount.

2) Comparison of APR is more useful for Fixed Rate Mortgages. Since the interest rate for Adjustable Rate Mortgages are not fixed, the Annual Percentage Rate that the lenders quote is not the actual figure and is based on forecasts.

3) Annual Percentage Rate is calculated for the full term of the loan, but borrowers rarely keep a mortgage for 15 or 30 years. When a borrower refinance or sell a home after 5 or 7 years, a mortgage with higher upfront fees will end up being more expensive than a mortgage with low upfront fees and high interest rate.

4) You’ll find that calculation of Annual Percentage Rate varies from lender to lender. Sometimes lenders exclude some fees from the calculation of APR, so being a good buyer you must ask the lender about all the fees that are excluded from your loan.

Thus you have acquired a thorough knowledge of how to take the advantage of an APR calculator while taking out a mortgage.

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