How to measure true interest cost (TIC)?


The APR is said to measure the true interest cost (TIC) of home loans. It takes into account the interest rate, closing costs including any prepaid points, and all loan-associated fees. Lenders are required by the Truth In Lending Act to disclose mortgage APR.

Since the APR on adjustable rate mortgages takes the starting interest only, calculating the interest cost (IC) may be more accurate if you develop several scenarios.

Borrowers should request that they receive 2 true interest cost calculations when they apply for a mortgage - one for the life term of the loan, and one for several years from the time of application. Since many borrowers repay their loans within 5 to 7 years, the old way of calculating TIC or APR over the whole, say, 30-year period of the loan is not useful enough to borrowers who do want to know how big the APR is if they repay the loan within several years and whether or not to pay points upfront.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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