Sounds relatively straightforward, right? Unfortunately, APRs aren’t always so clear-cut. ![]() For example, if you see an advertised APR that’s very close to the interest rate during your research, you’ll know that particular lender charges fewer fees. In theory, APRs were designed to make it easier for shoppers to evaluate various mortgage lenders by providing a complete picture of mortgage costs. As a result, the APR is almost always higher than the mortgage rate. The annual percentage rate (APR) is a broader measure of your mortgage cost since, in addition to the interest, it often includes lender fees and other charges you’ll pay to obtain the loan. The interest rate is also used to determine your monthly mortgage payment. This rate is determined by various factors including prevailing rates, your credit score, loan-to-value ratio, property type, and loan type (fixed vs. The interest rate on your mortgage is simply the amount you’ll pay a lender beyond the principal (the amount of money you originally agreed to repay) it does not reflect any fees or other charges you may incur to obtain the loan. Most first-time buyers know to sock away cash for a large down payment, but how many know the difference between an interest rate and APR? This article will help clarify this specific aspect of the mortgage process. Buying a house is often an exciting step closer to financial freedom, but the mortgage process can leave homeowners scratching their heads.
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