FM VA Web Content Viewer (JSR 286)

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Comparing mortgage rates

Learn the differences between APRAnnual Percentage Rate and interest rate.

To compare mortgage loans, it is important to understand both the mortgage’s interest rate and the mortgage’s annual percentage rate . Freedom Mortgage will work with you to explore all loan options because we offer dedicated mortgage guidance every step of the way.

The interest rate is the cost you will pay each year to borrow money, and this is expressed as a percentage rate. The base interest rate does not reflect any fees or other charges you may have to pay for your mortgage loan.

An annual percentage rate is a broader measure of the cost to borrow and it is also expressed as a percentage rate. In general, the APRAnnual Percentage Rate reflects the interest rate plus any points and other charges that you pay to get the loan. For that reason, your APRAnnual Percentage Rate is typically higher than your interest rate.

Points are an up-front fee paid to the lender when you close on your loan. Each point equals one percent of the loan amount.

Lastly, closing costs typically consist of loan related fees, title and escrow charges, government recording and transfer charges and can add thousands of dollars to the cost of your loan.
 

Let’s take a look and compare two loan options:

Mortgage Rate A: 4.50%, 4.838% APRAnnual Percentage Rate
Mortgage Rate B: 4.75%, 4.836% APRAnnual Percentage Rate

The advertised mortgage rate “A” is 4.50%, but requires that two mortgage points be paid – it also has $2,000 in additional closing costs, which means the APRAnnual Percentage Rate is 4.838%. Meanwhile, advertised mortgage rate “B” is offered with no points and just $1,000 in closing costs, so the APRAnnual Percentage Rate would be 4.836% which is slightly less than the option from lender “A”.

 

Contact us so we can help you with your options. We’ll offer you guidance from our knowledgeable Loan Advisors and extraordinary service as well!

FM VA Web Content Viewer (JSR 286)

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FM VA Web Content Viewer (JSR 286)

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