APR mortgage calculator | Personal Finance Opinions
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How an APR difference from interest rates?
The rate of interest is the percentage of the loan amount that a lender will charge you for borrowing the dollars. APR is calculated by adding the interest amount with the lenders upfront fees, other origination fees. This is expressed in a yearly percentage of the loan amount. Since all the costs are considered APR will be higher than the normal rate of interest.
4 Limitations of using APR:
1) Third party fees are excluded while calculating the APR. Home appraisal fees, home insurance and title fees are usually not taken into consideration when Annual Percentage Rate is calculated, but they usually add up to a significant amount.
2) Comparison of APR is more useful for Fixed Rate Mortgages. Since the interest rate for Adjustable Rate Mortgages are not fixed, the Annual Percentage Rate that the lenders quote is not the actual figure and is based on forecasts.
3) Annual Percentage Rate is calculated for the full term of the loan, but borrowers rarely keep a mortgage for 15 or 30 years. When a borrower refinance or sell a home after 5 or 7 years, a mortgage with higher upfront fees will end up being more expensive than a mortgage with low upfront fees and high interest rate.
4) You?ll find that calculation of Annual Percentage Rate varies from lender to lender. Sometimes lenders exclude some fees from the calculation of APR, so being a good buyer you must ask the lender about all the fees that are excluded from your loan.
Thus you have acquired a thorough knowledge of how to take the advantage of an APR calculator while taking out a mortgage.
Source: http://www.personalfinanceopinions.com/2012/07/apr-mortgage-calculator.html
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