Mortgage APR Calculator
When shopping interest rates, it can be tempting to stop there. But the true cost of a mortgage loan is expressed as the annual percentage rate, or APR. Just input your loan amount, interest rate, and closing costs into an APR calculator. That will help you compare loans with different rates and fees.
Shopping Mortgage Rates: Comparing APRs
Closing costs can vary considerably. The best way to ensure that you're getting the best possible loan at the lowest cost is to use the APR loan calculator to run the numbers for several different loan proposals. Comparing interest rates alone will not provide an accurate idea of which loan offer provides the best deal.
APR does have limitations, however. Only use it to compare the same kind of loan . For example, a 5/1 ARM at 4% costing 2 points to a 5/1 ARM at 4.75% costing 1 point. Dont try to compare that ARM to a 30-year fixed loan. It wont work. And if two loans have similar APRs, choose the one with fewer up front costs. It will be the cheaper loan if you dont keep it forever.
Knowing what APR is designed to show, and understanding it's limitations can help you use this calculation wisely when shopping for a home loan.