Interest Rates And Other Fees Affect The Total Amount Owed On Your Home Loan

Interest Rates And Other Fees Affect The Total Amount Owed On Your Home Loan

Often times the interest rates and other fees that are added to a mortgage loan amount can be confusing, and a bit of a shock, especially to the first time home buyer.  Below is a quick overview of the cost of obtaining a mortgage loan.

Interest Rates

When you find out the loan amount you are approved for, your mortgage lender also quotes you the interest rate you will be charged on that loan amount which impacts the total cost of your loan.  Consider the interest rate as a "rental fee".  Let's say I rent you the use of my pressure washer which I charge you a daily fee for, and also expect you to return. When you are finished using my pressure washer, you return it along with the total fee I charged you.  Borrowing money through a mortgage is basically the same. The amount you need for a mortgage is loaned to you, you are charged an interest rate for using that initial amount, and the lender expects to get the initial loan amount back plus the interest that has accumulated over the term of the loan.

The higher the interest rate that is set (the "rental fee" for the money), the more interest you will have to pay, and in the end, more money you will have to borrow.

Lender and Broker Fees

In addition to the interest rate, there are also lender and broker fees that are due at closing.  These are the costs associated with that particular lender and are itemized for you on the Good Faith Estimate (GFE) that your mortgage lender is required to provide to you.  These fees should be considered and evaluated when you make a loan decision.

APR

The Annual Percentage Rate (APR) includes additional fees or costs associated with a loan and is a better way of determining the total cost of a mortgage than its basic interest rate.  The additional fees associated with the loan are disclosed on the GFE and the APR will be shown to you on a disclosure called the Truth in Lending Disclosure. The Truth In Lending Disclosure will include what your interest rate is, the APR, and the total cost of all your payments.

The interest rates, the lender and broker fees, and the APR is a good way to compare the overall cost of your loan. If you have any questions about the rates or fees associated with your loan, do not hesitate to ask your loan officer to provide an explanation.  



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Phone: 817-733-7791
Dated: October 29th 2015
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About Susan: Originally from upstate NY I relocated to the DFW area, and have lived between Fort Worth and Arling...

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