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The APR, or annual percentage rate, on a mortgage reflects the interest rate as well as other borrowing costs, such as broker fees, discount points, private mortgage insurance, and some closing.
The APR on an FHA loan will always be higher than on a conventional because of the upfront mortgage insurance. The APR, while quoted as an interest rate, is not one. Your rate is the 4.5%. Your actual interest rate is also considerably higher than that because of the monthly mortgage insurance you pay for what is most likely the life of the loan.
Because the annual percentage rate is a function of the closing costs, the APR will always be higher than the interest rate unless you are seeking a no cost loan. A no cost loan has the same interest rate, same APR, but no-cost loans cost more because the higher rate you’ll get from the lender offsets the closing costs recapture. Learn more about no-cost loans.
Interest rate vs. APR. The interest rate is the cost of borrowing the principal loan amount. It can be variable or fixed, but it’s always expressed as a percentage. An APR is a broader measure of the cost of a mortgage because it includes the interest rate plus other costs such as broker fees, discount points and some closing costs, expressed as a percentage.
You’ll notice the APR is usually higher than your interest rate because it encompasses all these loan costs. APR is usually higher than your interest rate because it encompasses multiple loan costs.
In a Best Case Scenario the Interest Rate will move to (Index + Margin) at the First Adjustment. It will then stay at that rate for the entire life of the loan. This option typically presents a low APR (often lower than the note rate) because the maximum amount of payments on the loan will be at the lowest rate.
Around 77 per cent is earning less than 1 per cent – so we’re offering rates higher than 77 per cent of savers would achieve.
Do you like paying more for your mortgage payment than necessary? We didn't think so. But worrying about your mortgage payment or interest.
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