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What is APR?

Whether it’s home buying, taking out a credit card or taking out a loan, APR is crucial in any borrowing type of transaction that you are interested in doing. It helps to know all about an APR, including what it actually is, how it’s calculated and its application. These factors can all help you in making an informed decision when doing certain business transactions that especially has to do with borrowing and lending. Let’s take a more detailed look at the subject of APR and what it could mean for you and your Waltham real estate journey.


What is APR?

The acronym APR stands for annual percentage rate, and it is a yearly representation of your interest rate. You can look at it as the actual cost of borrowing money to take out something like a mortgage. Moreover, the APR for a mortgage can also include particular loan costs, such as points and mortgage origination fees. These fees are what differentiates an interest rate, which is the percentage of the principal that is charged to take out a loan, from an APR. As such, when borrowing it’s important to pay attention to both the APR and the interest rate. The idea is that you’ll get a clear understanding of how much it will cost you to take out a loan of any kind.


Types of APR

There are different types of APR’s that can be applied to a mortgage that a real estate agent may tell you about. The most common ones you hear about are fixed APR and a variable APR.


Fixed APR: The APR doesn’t fluctuate based on an index for the life of the loan. This makes fixed APRs a little more predictable and can easily be worked into budgeting plans. It is still possible for the interest rate itself to change, but the issuer typically has to provide some notification of the change.

Variable APRs: The APR is tied to an index interest rate and can change and is less predictable. The agreement will highlight how the APR can change over the life of the loan. It can fluctuate to your gain, by providing lower interest rates, for example, or to your loss, increasing your interest rate.


Importance of APR

In the Waltham real estate market and other sectors, it’s essential that you have some insight into the type of APR that is applied to your mortgage, which essentially becomes new debt. A good Realtor will tell you that the price to borrow to pay for your home should not be taken lightly. When getting a piece of real estate through mortgage assistance, you want to avoid high APRs that could cripple your budget. This can be avoided to a certain degree by not taking out a lot of debt, to begin with.


Things that Impact Your Interest Rate

As much as you may wish you could set your own APR, the lender technically establishes the interest rate that is offered on a loan, and this will impact your APR. Still, there are other factors such as credit scores that could impact your APR. Excellent credit scores will carry more weight and be beneficial in getting a lower interest rate than if your credit scores were bad.


Be it, home selling or buying, APR isn’t something that can be overlooked. It is important in Waltham realty when deciding to take out a mortgage. Borrowers should know the types that are available to them, why it’s important and factors that could impact APR. Contact Hans Brings today to learn more about APR and the overall home buying or selling process! 

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