When shopping for a mortgage, it's easy to become overwhelmed by the many numbers involved in the transaction. Two numbers that measure important costs within your loan are the APR and the mortgage interest rate.
The mortgage interest rate is the cost of borrowing the mortgage loan amount expressed as a percentage. This rate only takes into account the amount of interest per year that you will pay on your loan. The interest rate is used to calculate your total monthly payment.
The APR, or Annual Percentage Rate, of your loan reflects other costs associated with the mortgage in relation to your interest rate. The APR calculates the total cost of your loan, including the origination fee, mortgage insurance, any discount points, closing costs, and other charges associated with the mortgage. These costs are then presented as a yearly interest calculation, which is usually higher than your mortgage interest rate. The APR is used to calculate the total cost of your home loan.
Call me today to set up an appointment! I would love to review your finances and answer any other questions that you may have regarding mortgage vocabulary. My goal is to make your home loan process easy to understand, so I am happy to take the time to answer your questions and ensure that you know and are comfortable with each step of the process.