Description: Know what mortgage APR is and how you can calculate it with the help of an APR calculator.
Mortgage APR: What is it and how can you work it out?
Mortgage APR calculator is a useful tool for the homebuyers. It helps you calculate the Annual Percentage Rate on your loan. It is important to calculate APR since the lenders use this to include interest rates and other fees into a single rate.
A mortgage APR calculator can work as a helpful tool to compare various loan offers. If you can use this tool properly, you can save both time and money. This article would help you get a better idea about APR and how you can calculate it. You can get many loan quotes, compare the APRs of the home loan programs and go for the one that offers the lowest APR.
Annual Percentage Rate
APR represents Annual Percentage Rate. It is a way of calculating the overall cost of a mortgage. It exceeds the quoted interest rate by including one-time costs such as closing costs and points and recurring expenses like mortgage insurance. The APR typically demonstrates how these charges affect the interest rate when distributed over the entire duration of the loan.
What information do you need to calculate APR?
The APR calculator is one of the most easy-to-use mortgage calculators and this is one of its attractive features. If you want to calculate APR on a loan you’re looking at, you need to enter the following inputs into this calculator:
Loan amount: The amount that you plan to borrow.
Quoted interest rate: This is the basic rate of interest offered to you prior to including other expenses.
Loan term/repayment term: This permits you to select whether the loan would be paid off over a period of 15, 20 or 30 years. The higher the repayment term, the less the closing costs would affect the Annual Percentage Rate, while the more you would pay in total interest costs. For further information on the affect of various loan terms, you should try out an interest payment calculator or a monthly payment calculator.
Closing costs: These costs include different costs necessary in originating a loan. A closing cost calculator can help you work out this figure.
Points: This is a percentage of the loan amount made as an upfront payment at the start.
The outcome and what it suggests to you
When you click “calculate”, you would be supplied with a figure that includes both the base interest rate and other costs. If you use APR, you can compare apples to apples i.e. comparing similar types and sizes of loans with different APRs.
Always remember that APR would work for you when you compare similar types of mortgages. You can’t use it while comparing a fixed rate mortgage with an adjustable rate mortgage. Furthermore, since this calculator distributes costs throughout the duration of the loan, this doesn’t imply the actual expenses would be distributed. A small number of people retain their mortgages for the whole term. Hence, if two loans have equal annual percentage rate, the loan with lower up-front fees would be the better offer.
