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More Information
Purchasing a Home
Saving Money on Mortgage
Federal Laws
Mortgage Do’s and Don’ts
Your Rights
Qualifying for a Mortgage
Choosing the Right Loan for You
Fixed vs. Adjustable Mortgages
Loan Costs
APR, ARM and GPM
Purchasing Agreement
The Closing
Interest Rate Buydowns
Your Buying Power
Mortgage Terminology
 

Loan Costs

Lenders rarely help determine the total cost of a loan. As a result, you will have many other charges to consider and absorb in totaling the price of your loan. Annual percentage rates of a mortgage are difficult to understand; therefore, it is important to review all the similar costs of ARMs.

Unlike other purchases, mortgages have variable pricing. Most lenders will determine the rate of interest, points, and other fees, but leave the calculation up to you, yet you need to know the total cost so you can compare this loan with rates offered by other lenders.

Using the APR to compare lenders is not always the most advantageous. There are actually two ways you can calculate the total cost of a loan, which will allow you to compare not only fixed rate, but also adjustable rate mortgage loans.

Fixed Rate Cost Analysis
First, begin with a monthly statement to help you determine the interest cost left on your current loan. Second, take the monthly payment you are about to make and then total the monthly interest amounts from that payment up to and including your last payment. Next, get a written quote for all fees you will be charged for refinancing. Then, refinance your interest charges using the new loan rate. If you choose not to remortgage, you will pay the sum of interest calculated in your first step. If you choose to remortgage, compare your preliminary sum with your secondary total.

Adjustable Rate Cost Analysis
To justify refinancing with an ARM, you need to show the savings that could be yours by adding up the total cost of your present loan and contrasting that with the total cost of your new loan. The cost of your present loan should include additional fees and future interest charges for the rest of the period.

If you are planning in live in your present home for five or more years, you will need to know what the principal will be in five years from now, taking into account your current mortgage and your new loan.