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Home Loan Rate Calculator - How to use a home loan rate calculator

mortgage fees annual amortization

When looking to purchase a new home, or refinance an existing home loan, understanding how a prospective mortgage actually works can be quite confusing. While a home mortgage broker may tell you all of the details of your mortgage offer, such as rate, amortization, and fees, knowing how all of the costs tie into your total mortgage cost can be quite confusing. Luckily, through the use of a home loan rate calculator, you will be able to understand what the true cost of each mortgage offer is.

To use a home loan rate calculator, you will need to know several pieces of information. You will need to know the mortgage interest rate, the amortization period, all the fees associated with the mortgage, and how long you plan on keeping the mortgage. The amortization period is the amount of time it will take you to repay the loan. Shorter amortization loans come with lower rates and will be repaid much quicker, but you will pay more money each month.

Knowing the fees associated with the loan is important because they are not incorporated in the listed mortgage rate, but can have a dramatic impact on the true cost of the mortgage. There are many fees included with getting a mortgage. Some of the most common fees are mortgage points, origination fees, appraisal fees, and title fees. Be sure to request a full fee schedule from your mortgage lender prior to using the home loan calculator.

Determining how long you will keep the mortgage is important because the fees that you paid are paid up front, as opposed to over a certain period of time. This means that if you keep a mortgage for just a few years, the costs of the fees, on an annual basis will be much higher than if you kept the mortgage for only a few years.

Once you have gathered all of the information listed above, you will be prepared to use the home loan rate calculator. After inputting all of the information into the home loan rate calculator, the calculator will present you with your annual percentage rate. The annual percentage rate is the true cost of the mortgage, which takes into consideration how much you will pay in fees over an expected period of time. Once you have the actual annual percentage rate, you will be better suited to compare the true rate to other mortgage products.

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