ark@alice.UUCP (Andrew Koenig) (05/06/85)
> When comparing different loans you should condense everything down into > a simple APR for each seperate loan. This requires that you: > (1) Compute the payments for a loan > (2) Find out what the Total finance charge is that you must pay at closing. > This normally includes a origination fee,Points, first months interest > and anything else the bank wants to throw on. > (3) The amount that you are actually borrowing is the loan amount minus all > the up front finance charges. Take this and the payment amount and > figure out the actual interest rate. It may well be easier than this. I think that people who want to lend you money are required by Federal law to tell you the APR of the loan if you ask. Thus you only need to do the calculations if you don't trust them. Of course, you probably shouldn't trust them.
john@hp-pcd.UUCP (john) (05/09/85)
<<<
When comparing different loans you should condense everything down into
a simple APR for each seperate loan. This requires that you:
(1) Compute the payments for a loan
(2) Find out what the Total finance charge is that you must pay at closing.
This normally includes a origination fee,Points, first months interest
and anything else the bank wants to throw on.
(3) The amount that you are actually borrowing is the loan amount minus all
the up front finance charges. Take this and the payment amount and
figure out the actual interest rate.
In comparing Fixed rate with ARMs is a lot harder. You should try and find
the "worst case crossover" point for a ARM. To do this assume that the ARM will
increase at its maximum rate and plot out the outstanding principle for each
month. Then do the same for a fixed rate and see where they cross over. To get
a true comparison you should NOT use the regular payments for the ARM but
figure it as if you payed the higher fixed loan payment with the excess going
to pay off the principle. If the crossover occurs in six years and you plan to
move in five then you should go with a ARM (although a assumable fixed might
make it easier to sell). Likewise if you feel that inflation is dead and buried
it is better to take the risk and save money.
John Eaton
!hplabs!hp-pcd!john