Let say you’ve been paying on your 30-year amortized $200,000 home mortgage at 5.5% for 3 years. You’ve made monthly payments $1,135.58 for 36 months. The question is this. How much (in approx. dollars) do you think has been applied to your principal amount (principal reduction-your equity)?
Is it: a) $8,500 b) $30,200 c) $24,800 or d) $15,700?
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When you see an advertisement stating an Annual Percentage Rate aka APR for its mortgage or loan program, you will need to know what makes up that figure. The APR is dramatically influenced by many factors, so do not let it tease you into a false sense of being fairly treated. APR is defined as the percentage cost (or relative cost) of credit on a yearly basis. The APR yields a true rate of interest for comparisons with other credit sources.
In a television interview, viewers told that today’s national mortgage APR was 6.13%. However, this expert did not share what parameters were used to compute this APR; i.e. whether origination and discount points where being charged or the down payment requirements to obtain that APR. These two factors are just the beginning of a long list cost influencers.
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