Why You Should Always Compare the APR When Shopping For A Mortgage Refinance
During the process of getting a new mortgage, it makes sense to shop around, to make sure that you are getting the best deal. If you are shopping around, there are several points of comparison that you could refer to. One of the most important items to compare is the annual percentage rate or the APR. The APR is one of the most critical aspects to evaluate when you are in search of the best deal. Here are a few things to consider about comparing the APR on a new mortgage.
One reason that you should compare the annual percentage rate when you are shopping for a mortgage is so that you can get the best monthly payment. The APR is going to directly affect how much you pay on a monthly basis. The APR is a combination of the interest rate on your loan and the fees associated with borrowing money. If your APR is too high, you will pay more than you should. This means that you should try to get the lowest rate so that you can get a payment that fits within your budget. Otherwise, you might end up living outside of your means, and trying to pay something that you can’t afford on a regular basis.
In addition to looking at the APR for payment purposes, you should also consider the lifetime savings that you could realize with a low rate. The APR determines exactly how much you are going to have to pay over the life of the loan. In most cases, you pay thousands of dollars in interest on top of the purchase price of your house. By getting a lower rate, you’ll be able to save quite a bit of money on the total purchase price of your house over a period of several years. Even a fraction of a percent smaller APR can add up to a difference of thousands of dollars when dealing with 30 year terms.
Watch Closing Costs
Although you may be concerned with the quoted APR, it is also important to make sure that you evaluate the closing costs. The APR includes the closing costs, so if you pay the closing costs in advance, it will not be a true representative of what you are paying throughout the year. At that point, you are only paying interest if the closing costs and fees are handled on the front end. Sometimes lenders ask you to pay points as part of your closing costs, which can also affect the APR. When you pay a point, it means that you have to pay one percent of the mortgage balance up front. Lenders sometimes use points as a way to collect some of the interest that you would pay upfront. This can give you a lower monthly payment, and a lower interest rate, but it still requires you to pay the same amount of money.
If you are in the market for a new mortgage, it is important to shop around with multiple lenders before making a decision. Although the APR is vitally important, you cannot just compare the APR, and be sure that you are getting the best deal. You have to look at other factors like the closing costs, the reputation of the lender, and the length of the loan term. Once you have closely evaluated all of the factors, you can make a better decision for your financial situation.