When you’re buying a home for sale, you’ll most likely need to take out a mortgage loan – but there’s a lot that most people don’t know about mortgages.
One example is the difference between interest rates and APR.
Interest Rate vs. APR: What You Need to Know
Your interest rate is one of the most important parts of getting a mortgage loan. And you want the lowest rate possible – even a small difference, like 1 percentage point, can save you tens of thousands of dollars over the life of your loan.
However, it’s even more important to know what your annual percentage rate is. Also known as your APR, the annual percentage rate on a mortgage loan is the one that gives you clues on the fees included in your loan terms. The APR represents the aggregated (compiled) cost of getting your mortgage through that lender. It’ll include things like your interest rate, discount points if you paid them, broker fees, closing costs and more. On the other hand, your interest rate only tells you how much your monthly mortgage payments will cost you.
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