What is APR?
APR is an abbreviation for Annual Percentage Rate. You will find the APR on your Truth-In-Lending forms when you apply for a loan.
The Annual Percentage Rate is not the “interest rate” that will apply to the borrowed funds. The rate that applies to the borrowed funds, and is used to calculate the monthly payment, is known as the “note rate.”
The APR represents the interest rate of the note plus the prepaid items (also known as closing costs) expressed as a constant rate, as if the prepaid items were averaged over the file of the loan. It is the dollar amount of finance charges converted to an annual interest rate, whether the finance charges are paid, up-front or included in the loan. Since the APR takes into account the origination fee and other charges as well as the interest on the mortgage loan, the APR is usually higher than the note rate.
|
|
