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Some key tips regarding interest rates:
- It’s not the rate you need to know:When applying for a loan, never just ask about the “interest rate,” but always about the APR. APR includes fees and costs and is the actual cost for the loan (if quoted correctly) based on an annual percentage. Interest rate alone doesn’t do it. Therefore, you may be quoted 5.00% interest, but have an APR of 5.50% after fees and costs.
- Check APR:Once you’ve quoted an APR, always check it against a mortgage calculator (these are available free online at places like Bankrate.com) to make sure it’s accurate. All you need is the loan amount, repayment and tenure to check. If the loan amount, payments and term you were offered doesn’t match the APR you were quoted, you were quoted incorrectly and need to find out the truth.
- The low rate you see isn’t necessarily what you get:Don’t be fooled – the low rates you see advertised are for the very best qualified. This means a 720 to 740 FICO or higher in today’s market, with verifiable income, a maximum loan-to-value of 80% and a low debt ratio. As your credit score drops and your equity utilization or debt ratio increases, your rate will most likely go up too! In addition, there are lots of additional “premiums” for things like cash out, condominiums, and the like.
- Rate is not the #1 consideration in many cases:As important as the rates and APR are, what is even more important is what you get for the rates and APR. You can get a good rate and bad credit or a competitive rate and a good loan. It comes down to looking at more than just the rate and payment, but also: the term, tax costs, fees paid, the purpose of the loan, and all costs or benefits. In other words, if you got the Greta rate, but you extended your loan term, increased your taxes, paid unnecessary fees, and didn’t capitalize on the best loan for your situation, it wasn’t profitable (it’s a rate increase). occurs most of the times) and term refinance). But if you manage your payments, terms, cut taxes, reduce debt, save money first, improve your financial situation, and negotiate a reasonable fee, you’ve really done yourself a great service. What is it!
I leave you with this nugget of truth from Proverbs 24:3 – “A house is built by wisdom, and is established by understanding”
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