What is the difference between a mortgage interest rate and an APR?
There are many costs associated with taking out a mortgage. They include:
- Interest Rates
- and Other Charges
The interest rate is the cost you will pay each year to borrow the money, expressed as a percentage rate. It does not reflect fees or any other charges you may have to pay for the loan.
An annual percentage rate (APR) is a broader measure of the cost to you of borrowing money. The APR reflects not only the interest rate but also the points, mortgage broker fees, and other charges that you have to pay to get the loan. For that reason, your APR is usually higher than your interest rate.
Tip: The cost for servicing a loan can vary from bank to bank and mortgage broker to mortgage broker. Depending on your circumstances you may opt for a lower APR if you plan to stay in your home for 30 years. If you plan on moving or stepping up or down in home size over the next 10 days after purchase you may want to seek a lower interest rate. To help you determine which program is right for your circumstances you want to seek out a lender that will take the time to understand your needs and long term goals.
As always I am available to answer any and all questions you may have on this topic or any other real estate related question.
For more reading and some examples of which loan package may be right for your circumstances Interest Rates or APR