If you’re unsure of how a monthly mortgage payment is calculated, then today’s message is for you. When it comes to mortgages, there are three important factors to know, two of which are very similar.
First, an interest rate is the rate you pay the bank for the amount of money that you borrowed. Think of interest rates as a monthly recurring fee on how much money you have to pay back.
APR, on the other hand, is a little bit different, and often people get these two concepts confused. APR is the interest rate plus some of the costs that you may be paying to get that interest rate, like banking fees. Think of APR as the total amount of money you’re borrowing over the life of the loan. Usually, APR is expressed as a percentage, and it’s always good practice to compare APR between lenders.
Also, let’s not forget about mortgage insurance. It can be a huge addition to your monthly payment, and it also has a rate. Make sure you ask your lender what your mortgage insurance rate is and how long it will remain on your loan.
Hopefully, these quick pro tips clarified these core mortgage concepts! Reach out to your local lender to get the information you need. As always, if you have any real estate-related questions we can assist with, feel free to give us a call or send an email. We’ll talk to you soon!