Housing APR from a Realtor’s Perspective

What is APR? It’s a question that many people have, but may not know how to answer. APR stands for annual percentage rate, and is basically the cost of borrowing money expressed in terms of an annual percentage. This number takes into account the interest rate as well as other fees associated with taking out a loan. So what does this mean for you when buying or refinancing a home? Keep reading to find out! At eXp Realty NJ, our experts are here to help explain everything you need to know about housing APR. So if you’re ready to learn more about this important mortgage term, keep reading! At NJ EXP Realty, our head agent Curtis Counts has your back. Join us in the Real Estate Term of the day: APR.

Learn The Basics About Housing APR

Curtis Counts Here with the New Jersey Real Estate Experts and today’s real Estate term of the day: APR.  Annual Percentage Rate. What does this refer to? This is the yearly interest generated by a loan that gets charged back to a borrower.  APR is expressed as a percentage that represents the actual yearly cost to borrow over the term of the loan. In layman’s terms, it basically means: every year you’re paying ‘this’ percentage to borrow ‘this’ amount of money. 3% per year, 5% per year 6% whatever it is.

This includes any fees or any additional costs associated with the transaction, but it doesn’t take into account compounding. Keep that in mind. So what that means practically speaking is: if you want to buy a house and you go out and get a 30 year mortgage for $200,000 dollars at 3% APR, what that means is every year you’re going to pay $6000 in interest on that loan; and that’s in addition to what your principal and what your taxes and what your insurance are. That’s just the interest that’s being charged back to you for borrowing that $200,000. Now obviously as time goes on, that number changes because your balance changes; but nevertheless, it’s a good way of thinking about what the cost of borrowing money actually is when you’re going out and getting a loan like this.

Practically speaking, what does this mean for buyers? Well, if you’re going out and comparing different mortgages from different lenders, this is one important factor you want to look at because this will give you an idea of what your annual costs are going to be in order to borrow that money over time; which will obviously have an impact on your monthly payment. But it’s also important to keep in mind when you’re budgeting for things like property taxes and insurance because those are also factors that are going to come into play when you’re trying to determine what your payment is going to be each month, so APR is certainly something you wanna keep in mind when you’re out there shopping for a mortgage. I hope this was helpful. Tune in next time for another real estate term of the day.

Thanks for joining us today as we continue our series on real estate terms. Be sure to check back next week when we’ll be discussing another important term. In the meantime, if you’re in the market for a new place to live and want some expert advice, don’t hesitate to contact us. We’d be happy to help you find the perfect home in New Jersey.

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