A Good Mortgage APR Calculator will Solve your
Puzzle!
Mortgage APR is the least understood term in obtaining a mortgage,
but a good APR calculator will uncover the APR secret!
Mortgage APR is often one of the most overlooked components of the
mortgage process and unfortunately it can end up costing home
buyers thousands of dollars in the long run.
By using a mortgage APR calculator savvy
prospective homebuyers can compare the offers by various lenders as
well as the many different types of mortgage plans.
This will help to determine which one might be the
most beneficial and financially rewarding in the long run.
Understanding Mortgage APR
Why is using a mortgage APR calculator and understanding
mortgage APR so important?
In order to understand just exactly how a mortgage APR
calculator can benefit you it is first imperative to understand
APR and how it applies to your mortgage.
APR refers to the annual percentage rate on your mortgage
loan. It is normally expressed like this example: 6%.
"It is actually the net effective cost of
borrowing to purchase a home. In other words, the APR actually
determines the total amount of money that you will eventually pay
over the course of the loan in order to buy your home."
When you use a mortgage APR calculator to
compare offers from different lenders you can determine whether it
might be financially worth it for you to pay more money upfront in
order to get a lower APR.
You may eventually pay less money over the course of your loan,
even though you paid more up front! Comparing Apples and
Oranges
Using a mortgage APR calculator let’s look at a couple of
examples.
Let’s say you obtained two quotes for your desired mortgage of
$150,000 on a 30 year term. The first lender offers you a rate of
6.5 percent in which you pay no discount points and $5000 in fees.
The second lender makes an offer to you in which you will have a
rate of 6.25 percent with 1 discount point of $1500 and $5,500 in
additional fees.
For the second lender that comes out to a total of $7000 in
fees.
It’s easy to see where this kind of situation can become very
confusing very quickly. One lender is offering you a lower rate but
you have to pay more money up front to obtain that lower rate.
How do you know which one is actually the better deal?
A mortgage APR calculator can help you to quickly make that
determination. It will help you to determine how much each loan
offer will cost you over the course of the loan.
That is what you really need to study; not how much the loan offer
might cost you up frontalthough it can be tempting to do so.
The Real Difference
Using a mortgage APR calculator you can learn that the offer
from the first lender will cost you $948.10 per month in monthly
mortgage payments with a total cost over the life of the loan of
$191,316.73 in total interest payments.
The offer from the second lender will cost you $923.58 per month in
monthly mortgage payments with a total cost over the life of the
loan of $182,487.29 in total interest payments.
You can see from the results on a mortgage APR calculator
that the difference between the offers from the first lender and
the second lender is actually a difference of $24.52 per month in
mortgage payments.
"This is a total difference of almost $8830."
Even subtracting the additional $2000 that you’ll
need to spend upfront in order to take advantage of the offer from
the second lender, in the long run, you will still come out more
than $6800 ahead over the course of the loan.
As you can see from this simple example, it would
be quite beneficial to know exactly how much an offer from a lender
is going to cost you over the life of the loan; especially when you
need to compare two or more mortgage offers.
Looking at a mortgage loan offer from a lender on the surface
without understanding how much it can eventually cost you is akin
to walking in the dark without a flashlight.
A good mortgage APR calculator can help to shine the light on the
path of your mortgage to clearly point the way to better
bargains!
