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Is there a difference between interest rate and apr?

by danneng475 from Verdi, Nevada. Aug 17th 2020 Reply


Nathan Kessler (nathan.kessler@guaranteedrate.com)
#44 ranked lender in Nevada - 81 contributions

Yes. Interest Rate is what the payment is calculated on, A.P.R. (annual percentage rate) is the cost of the loan calculated in a yearly rate. Let me know if you have any questions. 702-683-3126. Nathan Kessler NMLS 377217

Aug 17th 2020
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 2,236 contributions

The interest rate is the rate the lender is charging you for the use of their money for the period of time you have it. In other words, this is what the lender collects with each payment. For example, on a $100,000 loan, bearing a 6% note rate would earn the lender $500 the very first month. As the balance declines, the amount they earn would be less, but always 0.50% per month on the outstanding balance, or a 6.00% annual rate. The APR, on the other hand treats certain associated costs with a loan as though these costs were actually interest. These are called Finance Charges and include fees such as Processing, Underwriting, Lender Admin fees, The Escrow company's Settlement fee, any Mortgage Insurance, and a few other fees. Add these select fees up and add them to the total interest to be collected over the term of the loan to get the 'Total Finance Charge'. The Finance Charges are deducted from the Note amount to get 'The Amount Financed'. Essentially, the APR is the interest rate that would be charged if The Total Finance Charge was all interest and the Amount Financed was the amount you were borrowing. This calculation will always make the APR higher than the note rate. You should not always assume the loan with the Lower APR is better. You have to look at what is best for your particular situation. I hope this helps. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ Licensed in Arizona, California, Georgia, Oregon, and Washington. Need help in other states? We've got you covered. NEXA Mortgage is licensed in 46 states ~ www.ApplyYes.com 480-889-9000.

Aug 18th 2020
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