Mortgage Interest RateThe New Jersey Mortgage Interest Rate is the actual interst rate paid on borrowed capital. The interest is calculated upon the value of the assets in the same manner as any other loan such as credit cards or student loans. Interest can be thought of as "rent on money". For example, if you want to borrow money from the bank, there is a certain rate you have to pay according to how much you want loaned to you.
The fee is paid to the lender for their loss on other useful investments that could have been made with the lent funds. Instead of the lender using the assets directly, they are advanced to the borrower. The borrower then enjoys the benefit of using the assets ahead of the effort required to obtain them, while the lender enjoys the benefit of the interest paid by the borrower for the privilege to use it. The amount lent, or the value of the assets lent, is called the principal. Mortgage Interest or note rates are therefore the price of credit, not the price of money as it is commonly - and mistakenly - believed to be.
APR (Annual Percentage Rate)The New Jersey Annual percentage rate (APR) is the effective interest rate the borrower will pay on a loan, taking into account one-time fees and standardizing the way the rate is expressed. In other words the APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. APR is intended to make it easier to compare lenders and loan options.
The problem with this is that not all lenders are including the same "other" costs into their APR figures thereby further confusing the client about how to compare accurately several offers. As a guideline a savvy buyer should be sure to ensure that the following costs are included into all APR figures disclosed on a GFE:
- Pre-Paid Interest
- Origination Fees (including loan processing, underwriting and document preparation attorney and notary fees
- closing agent document preparation fees
- PMI (private mortgage insurance)
- Application Fees
- Home Inspection
- Credit Report Costs
- Title Fees