Paying a mortgage lawyer for an hour to look over the documents and make sure the lender isn't doing math gymnastics to cook their APR is well worth the cost. Many states require an attorney representing you as a borrower to check all mortgage documents before the agreement can become binding. The APR on the paperwork won't specify which fees are too high or unnecessary. Some fees, including closing costs, also vary from lender to lender. Excluding these costs from the APR calculation can give an artificially low number, which could make it more attractive if you don't know to check the fine print. Lenders get to pick what goes into the APR calculation in terms of added costs, including appraisal and brokerage fees. There are no rules dictating how lenders include or exclude fees from their advertised APR offers on mortgages and other loans. ![]() Use that number as the deciding factor to either apply or throw the offer in the garbage. If you carry a balance on the card past the special offer, you'll get hit with the new, higher APR all at once.Ĭheck the fine print on the credit card application to find out what the APR changes to after the promotion ends. The introductory APR, usually zero percent, lasts for only a short time. The APR flashing on the TV ad or printed on the mailer shouting "You're Pre-Qualifed!" in bold letters seems like a great idea, but the fine print ruins all that promise. Fear Introductory APR OffersĬredit card companies have lured unsuspecting consumers with outrageously low APR offers for years. This figure takes compounding into account, giving you a better picture of what you're actually paying. To avoid any surprises, ask your lender or card company about their offer's annual percentage yield (APY). The real interest you pay is 26.82 percent. That sounds competitive, but every month that 2 percent gets added to your overall balance, which allows it to compound. ![]() For example, a credit card company charges you 2 percent interest each month on your balance for a total of 24 percent for the year. Credit card companies or mortgage lenders don't usually adjust advertised APR to include compounding because it leads to higher interest rates depending on how often compounding occurs. ![]() The Effects of Compounding InterestĬompounding happens when a loan or investment earns interest on past interest. Commit them to memory before you walk into the lender's office. Here are a number of factors that can influence what you pay on your next credit card or home loan. Know the facts about interest rates and fees so you don't get fooled by the advertised APR.
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