Advantages of comparing interest rates

comparing interest ratesWhen you are looking for any mortgage deal there are two terminologies which you need to understand. First is annual percentage rate and the second is interest rate. Although they are stated in terms of annual percentage but there are different aspects for these mortgage deals.

The main advantage of comparing interest rates is that it helps to make the concept of mortgage deal clearer. Since mortgage deals are long term deal that is why it is better to understand the comparison between the rates. Interest rate is nothing but amount of rate interest which will be charged for the full loan. This will be calculated on a yearly basis and there is a specific way to calculate the interest. Annual percentage rate on the other hand is different. It is the total cost of the deal and it includes the interest in it. The annual percentage rate is more useful to find out whether a mortgage deal is beneficial or not as it gives the exact figure of the deal.

If you check the online websites there are various mortgage calculators such as Bank Rate mortgage calculator, mortgage payoff calculator and mortgage refinance calculator. One thing which is common in all these calculators is the annual percentage rate. These calculators also help to calculate the monthly amount which you can pay. It would include all aspects such as tax, insurance premium, interest and the principal amount. When it comes to interest rates the calculation is simpler. The percentage will be given and you just have to find the total amount of the interest for the full period and divide by the number of months for which the mortgage will be standing. If you want to repay the mortgage early then the interest rate may change but the annual percentage rate remains fixed.