When it’s time to get a loan, for a new house or to refinance your current mortgage, there are key terms worth understanding so you can be an informed consumer and make the best decisions for your financial future. Two terms which can be confused but that have distinct meaning are Interest Rates and APR, or Annual Percentage Rate.
Interest rate refers the actual amount of interest you will pay on a loan. This is akin to a fee due to your lender for providing you with the funds to buy your house or refinance your mortgage. Interest rates will vary depending on the current market, in particular the bond markets around the world. A person’s credit will impact the interest rate as well. Those with good credit scores can expect to pay less in interest than those with lower scores. The extra interest helps lessen the risk of lending funds; which is a key reason to keep your credit score in check.
Annual Percentage Rate also known as APR reflects the total cost of a loan over its lifetime. This figure is calculated with a mortgage loan amount, the interest rate, and all fees associated with a loan. Taken all together, an APR reflects how much you are paying to have a loan in place. A key piece of information to keep in mind is, the closer in number an APR is to the Interest rate, the better your loan in terms of costs to you.
APRs creep up when additional fees are included. Lenders can add their own fees to loans, and many have a wide range of fees which may or may not make sense to have in terms of a consumers’ point of view. By checking the APR and comparing to the interest rate, you have a checks and balances way of knowing if you are getting dinged with a lot of extra fees or not.
Another way you can save money on the cost of a home loan is through a flat-fee servicer such as TTCU, which has just one flat fee for all their mortgage loans. Visit www.ttcu.com to learn about the different options available and apply for a loan. For real estate questions, contact The Baskin Real Estate Specialists of eXp Realty at 918-732-9732 or darrylbaskin.com