Welcome to Joe Knows Mortgages MINUTE, where we answer your mortgage questions.
On this week’s Joe Knows Mortgages MINUTE, we answer the question:
What is the difference between Interest Rate and APR?
The Interest Rate is the amount, in a percentage, that you will pay each year on the unpaid balance of your home loan.
Annual Percentage Rate (APR) is also expressed as a percentage rate; however, it is a broader measure of the cost of borrowing the money. APR includes other charges and fees such as the interest rate, points, mortgage broker fees, and other charges that you pay to get the loan.
When refinancing or taking out a home loan, it’s important to keep in mind that an advertised “Interest Rate” is not the same as a loan’s “Annual Percentage Rate”.
The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR.
All lenders must follow the same rules to ensure the accuracy of the APR. Be sure to carefully evaluate one loan’s APR against another loan’s APR to get a fair comparison of which lender is offering you the Best Deal on your mortgage. That being said, some lenders are very good at manipulating the APR, to be within tolerance, but may be just a bit unrealistic. Because of this, it is always best to get a Loan Estimate and work with a reputable, local lender.
Do you have a home loan related question that you want answered? We want to hear from you!
All you have to do is submit your question and it may be chosen for our next “Joe Knows Mortgages MINUTE” which we showcase on Mondays.
All questions will be replied to, so please submit your question below.