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What is the “APR”?

Posted on Saturday, August 18th, 2007 at 11:32 am.

This information kindly provided by Richa Badami of Countrywide:

Do you know why there is a difference between the interest rate and the APR? The interest rate is, simply, the actual rate of interest that is charged on the principle balance of your loan. The APR is a complex calculation that was originally designed to help consumers understand the cost of the loan, inclusive of interest and certain costs associated with closing. The problem lies in the fact that the APR is easily manipulated by inexperienced or unethical lenders, and can be easily misunderstood by consumers. Many items are included in the calculation of the APR such as interim interest and mortgage insurance, which have nothing to do with the interest rates and closing costs charged by the lender. Due to some of these defects in the calculation, using only the APR to compare lenders is not always reliable.Richa Badami, CMPS Creating Wealth with Mortgage Planning.Certified Mortgage PlannerThe Badami Empower Mortgage Group703-928-3030 Mobile703-779-7042 Direct Office866-409-3141 e-Faxwww.RichaBadami.com

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This entry was posted on Saturday, August 18th, 2007 at 11:32 am and was filed under All About Home Financing & Loans, drodio.com. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “What is the “APR”?”

  1. Richa Badami Says:
    August 18th, 2007 at 11:40 am

    Did you know that when the Federal Reserve Board reduces the Fed Funds Rate, it does not reduce mortgage interest rates? The Fed controls short-term interest rates, but it doesnt control long-term rates. Long-term rates are the key to what lenders charge for fixed rate mortgages. Most people assume that long and short-term rates move in tandem but they do not. Often, when a change occurs in short-term rates, long-term rates and therefore mortgage rates will move in the opposite direction.
    Richa Badami, CMPS Creating Wealth with Mortgage Planning.
    Certified Mortgage Planner
    The Badami Empower Mortgage Group
    703-928-3030 Mobile
    703-779-7042 Direct Office
    866-409-3141 e-Fax

    www.RichaBadami.com


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