The APR (Annual Percentage Rate) is the annual cost of a loan to a borrower including fees. It is also expressed as a percentage. It includes your interest rate, PLUS other fees and costs such as: lender fees, origination fees, discount points, and some closing costs. The Federal Truth in Lending Act requires every consumer loan agreement to disclose the APR, and this transparency is designed to give borrowers a basis for cost comparison of loans between lenders. The interest rate and the APR should never be exactly the same unless there are no fees on the loan.

Did you know….?

Some lenders will change what certain fees are called to avoid having to include them in the APR calculation, which can make it very hard to compare. This kind of practice is a red flag because it does not offer full transparency regarding the overall cost of the loan to the borrower. We recommend reviewing documents closely, and if you notice terms that don’t seem to be universal between each lender proposal, ask about them.

You can avoid the hassle and worry of falling prey to this practice by choosing a reputable lender, or broker. Affinity Mortgage Brokers is equipped to help you avoid these kinds of traps and make your borrowing experience easy, whether you want to refinance or make a new purchase.