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Annual Percentage Rate (APR)
One of the most asked questions during the mortgage
process is why does the annual percentage rate differ from the
interest rate that was quoted? To understand this question, you
have to understand the difference between the following two
terms:
- Interest Rate:
This is the yearly rate that a lender will charge you for
loaning you the money. The amount of your monthly
mortgage interest payment is calculated from this
percentage.
- Annual Percentage Rate:
The APR also reflects the cost of your loan on a yearly
basis. However, this percentage includes interest and
many of the finance charges paid by the borrower at
closing. These additional charges are the reason that
this percentage rate is higher than the quoted interest
rate.. The purpose of this government
required disclosure is to allow you to know the true cost
of borrowing money for the life of your mortgage. Your monthly payment is not based on
this percentage.
![[HRule Image]](images/div.gif)
What finance charges are included in
the APR calculation?
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- Private Mortgage Insurance
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Send e-mail to John Shea at: loan@mindspring.com
Last modified: February 01, 1997