Rates are flat today. The US durable goods report came in 200% above analyst’s expectations. Gold is down big. However, bonds and stocks remain mostly flat at the end of this morning. Today’s comparison mortgage rates with no lender fees are 4.25% on a 30 year, 3.375% on a 15 year and 3.0% on a 5/1 ARM. Click here for more details.
Today I combine a fun topic (Las Vegas) with an important mortgage topic (APR) to hopefully create a great resource for you. My friends from “The Hangover” help keep this one fun.
It’s all in today’s episode:
For more information about the CityCenter Las Vegas condo story click here.
Let’s look at the Annual Percentage Rate (APR) of your mortgage. I know it may not be as exotic as a million dollar suite in Vegas, but it is important for every borrower to know how it works.
The APR is a tool that is supposed to make it easier to shop around and find the best deal on your mortgage. It is calculated by adding your quoted rate to your lender’s quoted fees. In theory, once you have a quoted APR you should be able to shop lenders and compare them side by side to find out which one can give you the best deal on your mortgage.
Sounds great, right?
Unfortunately, it isn’t that simple. Lenders can manipulate the APR by charging you a discount point to buy down your rate. This will make their APR lower than the lender that quotes you a par rate (no discount point) and regular closing costs. While it may lower the APR, it also raises your costs to get the loan done. That is a sneaky way to do it and is NOT a good deal if you don’t plan on staying in the house for a while.
Always look at fees when sorting rates by APR.
Another issue with the APR is that it does not include appraisal and title fees in the calculation. It covers a majority of the fees involved in a loan transaction, but not all of them. Don’t be surprised when your closing costs are more than what is estimated in your APR calculation.
If you looked at our rates for today, you may have noticed that the rates and APR are the same on every fixed loan. That’s because I like to share rates with no lender fees for comparison reasons. It’s a level playing field.
However, ARM loans do not have the same rates as the APR. ARM loans calculate the APR differently than fixed rate loans, and sometimes it can be lower than the rate on ARM loans as a result. It’s complicated.
Does a lender with the lowest APR have the best deal for you? That all depends on your financial situation and how long you plan on staying in the house. The APR assumes you will stay in your house for the life of the loan, but we all know that rarely happens.
An APR is a true cost of taking out a specific mortgage over the life of a loan, but the lowest APR does not necessarily mean it is the best deal.
Let’s change the way people shop for a mortgage…forever!
PS. To ask a question, get advice, or find out if you’re getting the best deal possible on your loan, just post a comment below. Daily comparison rates, calculators, and other cool features are available in the free Rates in Motion LoanApp by going to your smart phone and clicking on this link, activation code is 9203780002