Mortgage Annual Percentage Rate, or APR
The Annual Percentage Rate, or APR, is a method used to compare home mortgage loans across different lenders.
There are so many different home mortgage programs available that it's difficult to keep up. And with the wide variety of home mortgage programs available comes and even larger array of financing options, making the subject of comparing mortgages even more complex.
Every mortgage program has its unique attributes, interest rates, fees, points, and possibly hidden fees. You can't focus on just one figure when comparing mortgages. And short of being a financial wizard, it's tough to crunch your own numbers to come up with an objective comparison of home mortgages.
The Annual Percentage Rate, or APR, is a method of comparing mortgages on a level playing field. The APR is your actual total cost per year, expressed as a percentage. So hidden costs are brought out into the open.
The Federal Truth in Lending law requires mortgage companies to disclose the loan's APR when they advertise a mortgage rate. It's designed to represent the true cost of the loan to the borrower, expressed in the form of a yearly interest rate. The purpose is to prevent lenders from hiding fees and upfront costs behind low advertised interest rates.
So remember, when you're shopping around for a mortgage loan, compare the APR, not just the quoted interest rate on the loan. This can help insure you find the overall lowest cost for your mortgage loan.