Is the APR the Primary Way to Compare Mortgage Scenarios?
Every mortgage loan will have an interest rate and an Annual Percentage Rate (APR). Federal law requires the lender to tell you both. The APR is a means for comparing different loans, which will include different interest rates but also different points and other terms. Designed to represent the “true cost of a loan” to the borrower, APR is expressed in the form of a yearly rate. Therefore, lenders are not able to conceal fees and upfront costs behind low advertised rates. Designed to make it easier to compare loans, APR can be confusing because the APR includes some, but not all, of the various fees and insurance premiums that can be associated with a mortgage. Federal law requires lenders to disclose the APR but does not clearly define what goes into this calculation. Therefore, the APR can vary from lender to lender and loan to loan. The APR on a loan associated with a market index, like a 5/1 ARM, assumes the market index will never change; however, ARMs are a variable rate loan ba
