Since monthly payments

spread the cost of a mort-

gage over a long period of

time, it’s easy to forget the

total expense. For exam-

ple, if you borrow $200,000

for 30 years at 6% interest,

your total repayment will

be around $431,680, more

than two and a half times

the original loan.

What seems like

minor differences in

the interest rate can

add up to a lot of

money over 30

years. At 7%

the total repaid

would be $479,160,

about $47,480 more

than at the 6% rate.

**++**

**+=**

**LOAN AMOUNT **

**(PRINCIPAL)**

**The amount you borrow. This is the **

**amount plus interest that you must **

**repay over the term of the loan.**

**INTEREST**

**Interest is the percentage of **

**principal you pay to borrow. It’s **

**the primary component of the APR, **

**and is determined in large part by **

**the current cost of borrowing in the **

**economy and your creditworthiness.**

**POINTS **

**(PREPAID INTEREST)**

**Interest that you prepay at the **

**closing. Each point is 1% of the **

**loan amount. For example, on a **

**$90,000 loan with two points, **

**you’d prepay $1,800.**

**FEES**

**Fees include application fees, loan **

**origination fees, and other initial **

**costs imposed by the lender.**

**THE COST **

**OF YOUR HOME**

**TERM**

**(LENGTH OF **

**THE LOAN)**

The longer the term,

the lower the monthly

payments, but the

more you’ll pay

in total.

**RATE**

Over time, a lower

interest rate will have

the greatest impact

on overall cost.

**The Cost of a Mortgage**

The cost of a mortgage depends on the amount you borrow,

the APR, and how long you take to repay.

**Bottom line: Any **

**of the factors will **

**increase the overall **

**cost, but a higher inter- **

**est rate and longer **

**term will have the **

**greatest impact.**

**HOME FINANCE**

**HOME FINANCE**

**12**