Lowest APR or Lowest Mortgage Rate?

People purchasing and refinancing homes always are asking the question is it best to get the lowest APR or the lowest interest rate and what’s the difference?

You need to make sure you are actually comparing apples to apples. If you are refinancing a home or purchasing a home you’re going to receive Truth In Lending Statement. On this Truth In Lending Statement there is going to be an annual percentage rate otherwise known as “APR”.

The APR is computed by taking your interest rate and your closing costs adding them together and then re-amortizing them over 30 years ( or the term of the loan). Because of this, the APR is always higher than the interest rate.

Look at the lowest APR or the lowest mortgage rate?

You need to be looking at the lowest mortgage rate. The lowest APR is higher than note rate, so why would you ever look at the lowest APR?

Here are the things you need to make sure to pay attention to when getting a mortgage:

1. The interest rate otherwise known as the note rate

2. The loan amount

3. Closing costs associated with financing

4. Total house payment

If you focus on these four things you will be much better off in terms of understanding your true costs of the mortgage then trying to wrap your head the annual percentage rate. The APR is nothing more than a government mandated disclosure mortgage lenders are required to provide consumers.

Don’t worry about the annual percentage rate, focus on the lowest possible interest rate you can attain.

Lenders can’t readily quote APR’s as they can available rates. The mortgage loan you’re going to take out does not show the note rate with an APR, it shows a note rate which is the interest rate associated with the money you are borrowing. The Mortgage Rate is the true cost of the mortgage over time.

Find the lowest mortgage rate by submitting a request for a mortgage rate quote.

Remember when you’re taking out a mortgage loan you are paying closing costs, paying an interest rate and you have a specific loan amount and of course you have a total house payment, those should be “weigh in” factors in your decision-making. Call us today to discuss mechanics behind the lowest APR or the lowest mortgage rate.

 

 

 

 

 

 

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5 Comments

  1. […] loan whether that be a purchase or refinance, you’re not always necessarily going get the preferred interest rate if your loan amount is on the lower end. It is certainly a contradictory way of thinking, but it is […]



  2. […] news aligned itself with furthering the positive trend in mortgage interest rates. Yesterday mortgage interest rates improved by 25 basis points keeping pressure on rates rising […]



  3. […] rates are looking very attractive, time to find the best possible interest rate for your next Sonoma County home […]



  4. […] these would be re-amortized over 360 months representing a 30 year fixed rate mortgage term. The APR is a disclosure lenders give which is another way of expressing the cost of the loan or the cost of the debt however you […]



  5. […] rate unless you are seeking a no cost loan. A no cost loan has the same interest rate, same APR, but no-cost loans cost more because the higher rate you’ll get from the lender offsets the […]



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