If you’re like many homeowners, understanding how terms like Annual Percentage Rate and mortgage rates affect your payments can be frustrating and confusing. If you’re shopping for a new mortgage or looking to refinance your existing home loan you’ll find lenders advertising two interest rates with their loan offers. Annual Percentage Rate or APR is intended to make mortgage shopping easier for you; however, you might find it’s little more than a marketing tool used by banks to sell overpriced home loans.
Check out this article on TheTruthAboutMortgage.com to make sense of the differences between mortgage rates and the Annual Percentage Rate:
If you’ve seen a certain mortgage rate advertised lately, you may have noticed two percentages. But why? Well, one is the mortgage rate, which is the interest rate you’ll pay every month (assuming you actually qualify). And the other is the APR, which is the interest rate factoring in certain costs, such as processing, underwriting, loan origination fees, mortgage insurance premiums, and so on.
http://www.thetruthaboutmortgage.com/mortgage-rate-vs-apr/
The biggest problem I have with Annual Percentage Rate is that while the law requires mortgage lenders to give you the Annual Percentage Rate, there is no standard as to how it is calculated or what fees should be included. If you want to make side-by-side comparisons of home loan offers from different lenders, the Annual Percentage Rate is not the way to do this. Another problem with APR is that it’s based on the fees found on your Good Faith Estimate, which is little more than a marketing tool for most banks.
The sad fact is that most lenders won’t give you an accurate representation of your home loan’s fees until they’re required to on your HUD-1 settlement statement. This is why mortgage shopping is so difficult. If you’re in the market for a new home loan and want the best refinance rates it makes more sense to shop for the right person to arrange your next mortgage, and not trying to compare apples to oranges with rate quotes.
You can learn more about finding the right person to arrange your next home loan without unnecessary markup of your mortgage rates by checking out my free Underground Mortgage Refinancing Videos.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
