What is the Annual Percentage Rate (APR) on my Truth in Lending Document and what does it mean?
A. APRs are a way to calculate the annual cost of loans, taking into consideration loan origination fees (points) and the other costs associated with securing a loan. The additional costs include appraisal and credit report fees as well as processing and document fees. When a Regulation Z (Reg Z, the lender’s disclosure of cost for the loan) is prepared for a buyer/borrower the prepaid interest is also included in the APR calculation. APRs were intended to give consumers a way to check the true cost of a loan. This is rarely the end result however as they fail to take into account many factors necessary to determining the best loan for a borrower. The biggest issue they ignore is the length of time a consumer intends to keep the loan. For example, if you sell or refinance in a short period, the low rate, high closing cost option that had the lowest APR would not be your best option. Q.
Related Questions
- Why is the Annual Percentage Rate (APR) on the Truth in Lending Disclosure higher than the "rate" shown on my note, which is the rate I thought I chose for my first mortgage or equity loan?
- I locked my interest rate, but the Truth in Lending Statement says the annual percentage rate (APR) is higher. Am I getting a different rate?
- What is the Annual Percentage Rate (APR) on my Truth in Lending Document and what does it mean?
