interest rate

interest rate

Mortgage APR: The difference between APR and interest rate

2d ago
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The annual percentage rate (APR) is designed to show you the total cost of the loan, which can be helpful when comparing loans from different lenders. The annual percentage rate measures both the interest charged as well as any other fees paid at closing that may include: • Origination fees • Private Mortgage Insurance -- Insurance if you put less than 20% down. • Discount points • Pre-paid interest • Processing fee • Underwriting fee • Document preparation fee The APR is intended to help you calculate the true cost of borrowing, as it prevents lenders from advertising low interest rates and tacking on fees and other costs that drive up the cost of the loan. APR does not include third party costs such as: • Title fee • Escrow fee • Notary fee • Home inspection fee • Transfer taxes • Credit report • Recording fee • Appraisal fee • Notary fee It's important to keep in mind that APR spreads the fees paid upfront over the entire life of your loan. If you do not plan to keep your mortgage for the full term or plan to refinance, it may not be a good calculation for you to compare. Ja Yung, a mortgage banker says: "So we like to think of it as kind of giving you the big picture of the overall cost of the financing, but the interest rate itself is what's used to calculate your mortgage payment." --------------------------------------------------------------------------------- We hope you've found this video and the many others on the My New Home YouTube channel helpful. Here are some other resources you might be interested in. For a quick explanation of mortgage products, check out: http://www.youtube.com/watch?v=99kpHX0vQ2Y To learn about some common mistakes people make when choosing a mortgage, check out: http://www.youtube.com/watch?v=65-BUNymxmY For more real advice from real people on finding and buying a home: http://www.youtube.com/mynewhome Videos are for informational purposes only and represent the opinions of the speakers. Chase does not warrant the completeness, timeliness or accuracy of the content. ------------------------------------------------------------------------------ VIDEO TRANSCRIPT: JA YUNG: The most confusing term that I hear from home buyers would be APR, also known as annual percentage rate. The APR is very confusing because it looks and sounds a lot like an interest rate. JA YUNG: The difference between an interest rate and the annual percentage rate -- interest rate is what your mortgage payments are calculated on. JA YUNG: The annual percentage rate basically takes into consideration not only the interest that you're going to pay over the life of the loan but any costs associated with obtaining that loan, as well. JA YUNG: So we like to think of it as kind of giving you the big picture of the overall cost of the financing, but the interest rate itself is what's used to calculate your mortgage payment.