When most people start shopping for a mortgage in Colorado Springs or surrounding areas, the first thing they do is look for the lowest interest rate they can find. And that can get them into trouble. A low interest rate can save you money, obviously, but it’s only part of the story. If you’re not careful, you could easily end up paying more in fees and other costs than you’re saving with the interest rate itself.
Be sure to look at all aspects of the loan as there are also certain fees just for taking out the loan.
Discount Points:
Discount points are the most common way of lowering a mortgage rate by charging higher fees. Each point is equal to 1 percent of the loan amount. For each point you pay upfront, you get the interest rate lowered by a certain amount.
Fees:
If you get a mortgage, you’re going to have to pay origination fees. There’s no way around it. Some mortgages may be advertised as “no fee,” but what they’re doing there is offsetting the cost of the fees by charging you a higher interest rate, which may or may not be a good deal.
About APR:
A better way of comparing mortgage offers is to look at the Annual Percentage Rate, or APR. The way APR works is that it’s basically the interest rate that would get you the same monthly payment on a loan with no fees as you’d pay on the same mortgage with the fees rolled into the loan amount.
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