APR or annual percentage rate, represents the cost of your mortgage as a percentage of the loan amount. APR is supposed to make comparing and selecting the best mortgage rates easier, and mortgage lenders are required by law to disclose it.
APR calculations assume that you are going to keep your mortgage for the entire 30 years, so upfront fees are amortized over that entire period. Breaking down fees over a long period dilutes their effect on the APR. However, the average homeowner only keeps a property for about 7 years. If you only keep that first loan for 7 years, your actual APR is going to be higher. So, the loan with the lowest APR may not be the best deal at all. In general, if you aren't certain that you're going to keep the property or your mortgage for more than a few years, and you are choosing between two mortgage offers with similar APRs, it is usually best to select the one with the fewest upfront fees.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment