Mortgage cost
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Mortgage cost

The mortgage cost depends on several things ...

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Your mortgage cost is going to depend on several things: the amount you borrow, the interest rate you are offered, your annual percentage rate (APR), and the length of your mortgage. Before you shop for your new home, it is important for you to decide how much of a monthly payment you can actually afford. This way you can shop for houses that are in your price range.

APR is the most confusing part of calculating your mortgage. APR combines your interest rate with some of the other fees of your mortgage to show you the true yearly cost of your mortgage. These fees include points, origination fees, and private mortgage insurance.

Your interest rate is the rate that you are charged for the privilege of borrowing money from your lender. This is based on the prime interest rate combined with your credit history. If your credit history is poor, your interest rate will be higher than the prime, and the amount of the difference will depend on how bad your credit rating is. But the interest rate is just part of the APR of your loan. To really understand the cost of your loan, you need to look at the other aspects of figuring out your APR.

Points are increments of a percentage of the interest rate on your loan. These can be paid at your closing, which reduces your interest rate. Origination fees are the fees that the lender charges for the services of making the loan. Some lenders charge origination fees, while others do not. Private mortgage insurance, otherwise known as PMI, is the fee that you pay on a monthly basis if you do not place at least 20% down as a down payment on your loan. Lenders use this insurance as payment if you should fail to pay off your loan. All of these factors contribute to the overall cost of your loan each year, or the APR.

The cost of your loan will also be figured based on the length of time you want to borrow the money. If you get a traditional thirty-year loan, you will have a lower monthly payment then if you get a fifteen or twenty-year loan. The amount you borrow will also affect how much your interest rate will cost you. The more you borrow, the higher your monthly payment will be.

Some homeowners choose to put their tax and insurance payments in escrow. This means that they pay a monthly charge for their taxes and insurance each month with their mortgage payment. If you choose to put these costs in escrow, it will increase your monthly payment. (don)
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