Mortgage Rate vs. APR – Debunking the Myth
While man cannot live on bread alone, mortgage research cannot live interest alone, too. There is always that mystery to many beginners what the difference between an APR and interest is. The mortgage rate and APR battle is not really a battle of comparison, but a cry for enlightenment. The two variables, APR and mortgage rate are both crucial in determine the right mortgage package but you cannot rely on mortgage rates solely. Understanding the differences between mortgage rate vs. APR can be very helpful in increasing your research skills, reduce your confusion and become a more competent searcher for quality mortgage.
In determining mortgage rate vs. APR, you have to analyze where they actually come from. Interest rates are determined by market movement and trends. The APR or the annual percentage rate is not derived from the market but from the actual plan itself. It also comes in percentile format and it shows the person the percentage in which a certain loan plan is more ideal than other loans. Just with the meanings, you can determine how the battle between the APR and mortgage rate is not possible since there is nothing similar in using mortgage rate and APR. The mortgage rate is basically the amount directly applied to the principal of the loan to determine the actual amount that you owe them. In the battle of mortgage rate and APR, the latter is deemed more useful in the initial stages of finding loans since is highly necessary en answering the question is you should go with a mortgage with a higher initial fee or a loan with a lower initial fee.
While the interest rate is a constant staple in calculating payments, the APR is a constant staple as well in calculating opportunities for saving and getting the most value out of the loan. The APR is the first thing you should always consider when looking for mortgages. In the battle mortgage rate vs APR, you really cannot choose from either one since if you disregard the relevance of the APR, you might be missing out on some very important aspects and at the same time, if the interest rate is not missing, there really is nothing to calculate. You have to know also that in mortgage analysis or research, you have to look at all factors that are included in the equation. If you overlook any of these factors or variables, you are risking not knowing where the real opportunities lie. For example, while Lender A asks for a higher initial fee at a lower interest rate, the other one offers a slightly higher interest rate for a cheaper initial fee. For some, it might be obvious that the latter one is better since the initial fee is lower but if you calculate the APR, you will be astounded to know that at the end of the day, you might be better off paying the higher initial fee at a lower interest rate.
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