Using a mortgage APR calculator

Mortgage lenders typically advertise mortgage rates. The actual costs of a mortgage include lender fees, recurring costs including mortgage insurance premiums, points, and closing costs in addition to mortgage interest. These costs are measured as an annual percentage rate of a mortgage amount, or APR. When reviewing mortgage quotes, estimating the APR is helpful for identifying your least costly options among several mortgage quotes.

Mortgage calculators: Using an APR calculator

Please note that using mortgage calculators, although helpful for making general estimates, cannot provide definite results. Variables including your credit, changing mortgage rates, tax payments and other costs can change the actual APR for a mortgage throughout the time between making an offer, accepting a mortgage, and closing. Here's how to use a mortgage APR calculator:

Enter the following information into the APR calculator:

• Loan amount: This is the amount you're borrowing:
• Quoted interest rate: Enter the mortgage interest rate quoted. Do not include costs other than interest.
• Repayment period: Use the drop down menu for selecting 15, 20, or 30 years as the mortgage repayment period.
• Points: One point is equal to one percent of the mortgage amount. Mortgage lenders may charge more points for lower mortgage rates.
• Estimated closing costs: These are costs including lender fees, document recording fees, escrow and closing fees, title insurance and incidental disbursements required for closing. Closing costs typically run between 2 and 5 percent of your mortgage amount, but are always subject to change according to individual circumstances and developments.

Using a mortgage APR calculator for comparison purposes only works when comparing mortgage quotes offering the same mortgage amount, interest rate, and repayment period. Use a mortgage comparison calculator for comparing mortgage quotes offering varying mortgage amounts, rates, and repayment periods.

Tips for reducing mortgage costs

Mortgage lenders generally advertise "rock bottom" mortgage rates, which are available to their best-qualified customers. In reality, you may be required to pay higher lender charges including points if you have less than excellent credit or have a sketchy employment record. Order your credit scores and reports and correct any errors in reporting before requesting mortgage quotes. Paying down consumer debt is also helpful for getting lower mortgage rates and favorable mortgage terms.