Interest Rates, Points, and APR
Every mortgage rate quote is a custom rate quote.
Interest Rate or APR?
What is the difference between the interest rate and the A.P.R.? You’ll see an interest rate and an Annual Percentage Rate (A.P.R.) for each mortgage loan you see advertised. Federal laws require that an APR be disclosed next to an interest in an attempt to help consumers shop for a loan.
Unfortunately, the APR can be manipulated and is often confusing. Your mortgage payment will be based on the Note Rate, not the APR – the APR has nothing to do with your payment.
The A.P.R. is a tool designed to compare different loans, which will include different interest rates but also different points and other terms. The A.P.R. is designed to represent the “true cost of a loan” to the borrower, expressed in the form of a yearly rate. This way, lenders can’t “hide” fees and upfront costs behind low advertised rates.
Other mortgage lenders have found they can manipulate the APR by doing things like quoting less pre-paid interest than you will actually pay, or mis-quoting third party fees, such as the attorney fees, at very low rates. They realize that by the time you get to closing and find out the truth, it will be too late. There are tolerances allowed with APR at closing, and some loan officers will take advantage of this to trick people and charge them more.
APR or Total Cost of Home Ownership?
A much better calculation is to know the Total Cost of a particular loan. The Total Cost is the sum if all the closing costs (not just some) plus all the interest you will pay over the time-frame you expect to have the loan. The total cost can’t be manipulated, and allows you to clearly see what a mortgage loan will cost you over the life of the loan.
As part of our commitment to you, we will show you the required APR . More importantly, we will also prepare a Total Cost Analysis(TM) for you to allow you to really understand what a home mortgage loan will cost you.
Be sure to ask any mortgage professional you speak with what the Total Cost is of a loan proposal, and not just the APR. If they can’t answer that, you should find someone who can provide this vital information for you to assist you with your home mortgage loan.
Average Interest Rates
Each week, Freddie Mac publishes their “Primary Mortgage Market Survey”. This is a useful tool to show whether interest rates are increasing or decreasing – but not much else. Their numbers aren’t valid for rate quotes because the assumptions they use, and the closing costs they assume are not the same for everyone. Additionally, mortgage interest rates will vary regionally, so you need a mortgage rate quote that applies to where you live, whether it be Charlotte or elsewhere in North Carolina or South Carolina. All of our home mortgage loan customers get a custom rate quote based on their credit score, loan program, and over 25 other factors.
Your interest rate may be higher or lower than Freddie Mac’s survey based on your unique mortgage loan needs and qualifications, such as paying more or less in closing costs, your specfic credit score, or the purpose of your home mortgage loan, any discount points, equity in your house, or a number of other factors. Our job is to determine the best mortgage rate based on your needs, not an arbitrary survey.
