Planning on getting a mortgage when purchasing a home? Then read on. When looking at home loans, you typically see the words interest rate and APR. When talking with Algonquin home buyers, I see that these are commonly misinterpreted as being synonymous… but they are actually calculated differently. It is important for home buyers to compare both and understand what they mean. Below are details on the difference between interest rate and APR.
Interest rates apply to monthly mortgage payments for the length of a mortgage. This is usually the figure given by companies. It does not reflect the up-front cost of a loan. Fees may differ among loan programs and lenders. For example, there may be up front charges (points) for one loan but not another. Other costs that might be included are mortgage origination and services charges, just to mention a couple. The APR reflects the interest rate plus specific closing costs, so it is a better reflection of overall expense. Your 103 Realty agent can get you connected to a mortgage professional to help answer any other questions you may have about APR and Interest Rates.
When weighing a range of loan options from the same or different lenders, the APR is a standard that may be used. You may be presented with a lower interest rate with greater fees and a higher interest rate with less fees. The real cost includes both what you pay up-front plus what you will incur in interest over time. The APR may therefore aid with the analysis.
|Loan Amount||Term||Interest Rate||Up-front Cost||APR|
|100,000||30 years||5 percent||1,000||5.09 percent|
|100,000||30 years||4.5 percent||4,000||4.85 percent|
To perform a good comparison of your options, it is important to ask for quotes close together in time (on same day if possible) as rates continually move up and down daily. Also know that they are subject to change unless you lock in. Always review the interest rate and APR jointly to better assess cost. An experienced loan officer can provide other guidance on the difference between interest rate and APR. It doesn’t matter if you’re buying an Algonquin home, or a Chicago condo, just make sure to ask your 103 Realty agent for a recommendation on a good loan adviser.
Questions? Contact Pat Kalamatas at 103 Realty via phone at (312) 880-7862 or email firstname.lastname@example.org