Why is My Home Loan Rate 3.5%, but my APR is 3.793

The difference in the interest rate and the annual percentage rate is the spread expressed as a dollar finance over the life of the loan. The aPR is always going to be higher than the mortgage rate because the APR, is a function of the total closing costs express as a dollar percentage over the term of the loan. The mortgage interest rate however is what you’re committing to borrow the rate at. Your payment is based on the mortgage rate, not the APR. The APR is a mandatory Federal Reserve disclosure under the truth in lending statement that expresses be amount of money over time.

The APR takes into consideration all of your closing costs even in the purchase situation where the seller is paying the closing costs, lender is required to disclose APR no matter who is actually paying it. The APR is an average of your interest rate, your closing costs and your loan amount all lumped together then re-amortized over the life of the loan for example on a 30 year fixed these would be re-amortized over 360 months representing a 30 year fixed rate mortgage term. The APR is a disclosure lenders give which is another way of expressing the cost of the loan or the cost of the debt however you choose to look at.

We advocate that the closing costs because they are non-reoccurring, meaning there a one time fee unlike mortgage interest which is reoccurring on a monthly basis, that after you secure the mortgage loan the closing costs soon become an afterthought and the focus becomes the monthly mortgage payment and that interest rate are we looking at every single month when you make your house payment. The interest rate is the anchor component of the loan because it sets the amount of interest are pale the life of the loan, your principal and interest payment as well as how soon you can get the debt paid off, the lower the interest rate the lower the monthly payment, the better.

By focusing on the mortgage rate, you can control the interest you pay overtime as well as your mortgage payment which are the two biggest components of buying a house or refinancing a mortgage.

Calculate how much interest you’ll pay using our complementary mortgage calculator today.



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