Should I Go By The APR Or The Interest Rate When Considering Mortgage Options?
If you’re about to become a new homebuyer, you might have been checking rates out online. Have you noticed that the APR and the interest rates on a mortgage aren’t the same percentages? What gives and which should you use?
APR
APR, or annual percentage rate, is a significantly broader, more accurate figure for you to use to determine how much house you can afford. The reason for this is because the APR actually includes the interest rate, but adds other factors in. Other factors added to the APR include the following:
- Broker fees
- Discount points
- Private mortgage insurance (PMI)
- Some closing costs.
Therefore, you should use the APR if you want a more real-world figure that will show your true borrowing costs.
Interest Rate
The interest rate percentage is simply what indicates how much money the homebuyer will pay to the lender simply for borrowing money over a period of time. It does not figure in other charges or fees.
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