What is APR? (Annual Percentage Rate)

An APR is the annual percentage rate that a homeowner is charged for obtaining the mortgage loan. The percentage amount represents that years actual costs for mortgage payments over the actual term of the loan.

When first applying for a mortgage loan the APR will help the borrower compare rates easily among other lenders they may be interested in. The law states that all loan companies and credit card companies must provide their potential client with the APR to make sure the borrower is well aware of the actual rates applicable to the loan agreement.

APR benefits?

If you are a new homeowner for the first time, you now know that mortgage loans can be very confusing. Some lenders and/or mortgage brokers may try to confuse the borrower by quoting many different numbers that can mean a variety of things most people do not understand. Because of this the U.S Gov’t passed a law called the Truth In Lending Act. This act requires the lender to quote the APR before the borrower takes on the loan.

The APR does not always only quote the annual interest rate, but may include other mortgage expenses as well including processing fees, private mortgage insurance, or any additional fees. However, they may be some fees that were not included in the APR so be aware of that and make sure you do your studying.

So because there may be other fees included in the mortgage that are not stated in the APR do not evaluate the actual loan just based off the APR. You as the borrower must do your own examination of all the expenses and charges related to the loan, to make sure you are getting a deal that you can afford.

If you enjoyed this post, make sure you subscribe to my RSS feed!