Mortgage APR Annual Percentage RateThe annual percentage rate (APR) is an interest rate that is suppose to show the amount borrowed plus the fee's involved in getting the loan. The government, in the Federal Truth in Lending law, requires mortgage companies to disclose the APR when they advertise a rate. A Note Rate is the actual interest rate charged by the lender on the money that is being borrowed. The APR is the cost of borrowing the Money. Often the APR is a confusing and difficult way to measure a true loans cost. A basic example is the best way to help clear up the difference between an APR and a Note Rate. A.P.R. EXAMPLE |
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*USING THE EXAMPLE CHART ABOVE 30yr $100,000 mortgage loan at 6.25% note interest rate with $1200 fees and closing cost. The APR is 6.3633% Explanation:The amount borrowed is $100,000 for a 30yr term with closing cost of $1200. The monthly payment on principle and interest is computed using the loan amount of $100,000 at 6.25% rate. The APR is computed using a note rate of 6.25%, $100,000 loan amount PLUS the $1200 closing cost fee. Therefore, the APR looks at the loan amount as $101,200 because that is the amount borrowed plus the cost of borrowing that money. If the amount borrowed was $100,000 at 6.25% on a 30 yr fixed term but the closing cost and fees were $3000 the APR would be 6.5332% If the amount borrowed was $100,000 at 6.25% on a 30 yr fixed term but the closing cost and fees were $500 the APR would be 6.2972% Both APR and Note Rate are expressed in a %. The intention of the APR is to show the total cost of loans, so that borrowers can compare the loan options from multiple lenders. TIP about APR: There tends to be no industry standards in computing APR'S so many loan APR'S are disclosed using different closing fees. Some include all the fee's others include very minimal fee's. This may be intentional or unintentional by the lender. It may be hard for lenders to disclose the actual APR without an application an a property address. Since, (in theory) the APR should include all fees like property/transfer tax, title fees, escrows an more, without a property an a application the lender can hardly know these fees when stating a rate. The best way to compare loans is to receive a good faith estimate from multiple lenders. The estimate will show the fees that are being charged in acquiring the loan at the specific rate for a specific borrower, loan product and property. APR EXAMPLE CHART
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| If you want to know the Annual Percentage Rate and You have the fees for the loan use the calculator link below |
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Local Average Interest Rate |
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*Surveys are regularly done (weekly) to determine what are average rates. 1-20 Lenders are contact for their average rates. |
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*Rates by Maryland lenders and Maryland mortgage brokers are for a 7- 30 day
period. APR includes no points /origination fee and $1200 closing fees.
Rates subject to change without notice. Rates may vary depending on borrowers
credit grade, income, the property type and the loan type ( lender and broker
conditions of lending). |
