Understanding Interest Rates and APRs
The more knowledge that you have about the details of a mortgage, the better you are at making decisions about the transaction. You feel less overwhelmed, even if it’s not your first time getting a mortgage.
If you don’t have a clear understanding of the difference between mortgage interest rates and APRs, you’re not alone. However, it’s important to understand what each number means because it can be a key component in selecting the right mortgage for you.
What Is a Mortgage Interest Rate?
Whenever you take out a loan or mortgage, the lender will charge you interest in order to make the transaction worthwhile for them. Over the course of the loan, you pay back the amount you borrowed and then some. The greater the interest rate, the more you can expect to pay per month over the lifetime of the loan.
What Is the Annual Percentage Rate or APR?
Although the annual percentage rate is also expressed as a percentage, it reflects not only the interest rate but any other charges that go along with it which includes how interest may be calculated. The APR is usually higher than your interest rate, but lenders are legally required to disclose the APR when they give you your loan estimate. (Looking at fine print is important.)
Why Do Interest Rates Go Up and Down?
You may have noticed that interest rates tend to fluctuate. However, you may not understand what causes interest rates to rise and fall. The short answer is that interest rates fluctuate with economic changes and is a tool used by the Bank of Canada to help keep our economy stable.
Making the move.
Whether you’re ready to start your journey toward getting your first mortgage or hoping to purchase a second home, understanding interest rates and APRs can go a long way in helping you make the best decision possible.
We partner with more than 50 banking institutions, which means you can count on us to get you the best rate in the shortest amount of time. For more information or to start your journey toward homeownership, please contact us today!
