The definition of APR
- Annual Percentage Rate: you can call it as the cost of your total loan credit calculated into an annual interest rate. It calculates what percentage of the principal you’ll pay each year by taking things such as monthly payments into account. APR is also the annual rate of interest paid on investments without accounting for the compounding of interest within that year.
- Including loan points and other prepaid finance charges, this rate reflects the true yield on the loan. It is the reason why a loan interest rate is normally lower than the APR.
- To get the most competitive loan, you can check and compare “apples to apples”, or APR to APR, on different loan programs.
What would you like to get after you’ve registered for a home loan? It’s a Loan Estimate (mentioned above) from your lender. If you registered for many types of loan, the loan officer will break down an LE for each loan type. The APR for a loan will be on page 3 of the LE, in the comparison section. You could receive it as soon as possible.
Are the APR and loan interest rate the same?
Most of the time, you will recognize that there is the difference between your APR and your loan interest rate right away. An interest rate is often lower than an APR due to added fees. An APR may not reflect the actual cost of borrowing because lenders have a fair amount of leeway in calculating it, excluding certain fees.
During the financing process, an essential comparison method is an APR. Interest rates, loan fees and points may be all over the map. However with multiple loan products, you can always use the APR to have an accurate comparison. After that, when you want to know the real story of an attractive interest rate, APR is a tool to evaluate it.
This handy trick is the way you can use to separate the pros and cons when deciding to choose a mortgage. You can compare a loan’s APR to its interest rate. An APR may be a red flag that the loan has attached some added costs. As a result, it would be noticeably higher than the interest rate. You can get your loan officer’s help to compare and you can have a better understanding of loan fees. For example, some fees that are deliberately excluded, including late fees and other one-time fees.
In some situations, mortgage APRs may or may not include other charges, such as appraisals, titles, credit reports, applications, life insurance, attorneys and notaries, and document preparation. And sometimes, you could recognize the other definition called “Annual Percentage Yield (APY)”. You should remember that they are very different, and shouldn’t be confused APR & APY (annual percentage yield), a calculation that takes the compounding of interest into account.
Please follow this link to update all information about interest rates
https://singlefamily.fanniemae.com/imported-content/ape-historical-yield/current-30-year-fixed
