One of the smartest things a person can do when it comes to purchasing a loan is to calculate the actual APR of that loan. Comparing loan options is important since this is the only true way to find out if you are getting the best deal possible on a loan.
The good news is this Calculate Your APR calculator is a simple tool to help you take the information from the mortgage loan offer and to translate it into information you need.
APR, or Annual Percentage Rate, is the amount of interest you will pay on the loan over a period of a year. This information affects how much your monthly payment will be, as well as how much you will pay overall for borrowing the money. It is quite easy to use this tool to calculate this information.
- Enter the loan amount, or the amount of money you plan to borrow to make the purchase of the home.
- Enter the interest rate the lender quoted you. If you have not received a mortgage loan quote yet, you can do that online, or you can simply use the average rate available currently.
- Then, enter the loan term, or the length of time you will pay the loan back. The average is 30 years and most loans are calculated at that by lenders.
- Then, enter the points you are paying if you are paying any. This will be provided to you in the mortgage loan quote you received from a lender, if you have one.
- Add in other costs. This should include any additional costs that will be rolled into the loan. It may include items such as closing costs and title insurance. These will be paid through your loan, through escrow or separately otherwise.
Once you do this, you will learn the stated loan amount and the effective loan amount, which are the actual figures in terms of how much you will pay per month. This information is critical to have in hand if you plan to compare loans from several companies or want to know the actual loan cost to you each month.
Keep in mind, you can, and should, alter your loan to fit your budget. For example, you may wish to spend less on a home and therefore reduce your loan amount, which will reduce your monthly payment. You may want to consider your options in paying points or extending or reducing the loan's term.
An APR is critical to know since it tells you what you will actually pay when you borrow these funds. The lender will provide this information to you, but he may or may not make it clear. This tool gives you the opportunity to be more in control of the offers you receive from lenders.