Mortgage Refinancing APR - What it Really
Means
APR is a term that can be a bit confusing, especially as it
is applied to Arizona mortgage refinancing. This is a term that
lenders disclose to a potential borrower and here is what it
entails.
The Annual Percentage Rate(APR) is required to be disclosed
under the Federal Truth in Lending law when providing a rate.
This rate is different than the note rate and allows a
potential borrower to compare lenders. The APR takes into
account any fees and rate variations involved with an Arizona
refinance or purchase.
The APR has no bearing on your payments. The payments are
affected by your loan note rate and term.
All things being equal, this would be a great tool to
determine which loan program would be most competitive when
searching for an Arizona mortgage refinance. However, mortgage
companies tend to calculate APR differently. The rules provided
to the lenders in calculating APR are a grey area.
Typically, the fees that are included in the APR calculation
are:
Points(discount and origination),prepaid interest,
processing and underwriting fees, document preparation fees and
PMI(private mortgage insurance).
Loan app fees and life insurance are sometimes inclusive in
the APR calculation.
Usually, these additional fees are not inclusive in the
calculation:
Title, Appraisal, credit, transfer taxes, recording, home
inspections, notary and attorney fees, escrow, and doc
prep.
APR will not give you the length of your rate lock. A lender
with a 15 day loan rate lock may carry a lower APR than one
with a 30 day lock.
It is not easy to compare a 15 year loan APR with a 30 year
loan APR. Usually the 15 year loan will carry a higher APR,
even with a lower rate due to the fees amortizing over a
shorter loan term.
Always get a good faith estimate to compare loan cost when
completing an Arizona refinance or purchase loan. APR can be
easily manipulated due to some of the factors we have
discussed. The GFE will break down the loan cost and true
interest rate which is what your mortgage payment will be based
on. Just be sure that the lender is consistent with the loan
terms provided on the GFE when you get to the closing
table.
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