When they are told the Annual Percentage Rate (A.P.R.) on a soon to be mortgage – most people believe that this rate is all inclusive and reflects the true cost of their loan. In fact, an article from the New York Times suggest otherwise. There are some loop holes that lenders are able to use.
“The A.P.R., which is often half a percentage point or more higher than the interest rate, or the cost of the loan itself, factors in other major costs, like the origination and loan processing fees. And it typically factors in the cost of “points,” or money that the consumer pays to buy down the interest rate. (One point is equal to one one-hundredth of the loan amount.) The higher these costs, known as upfront finance charges, the higher your A.P.R. will be.”
The key thing to know is that the A.P.R. typically does not factor in third-party costs like those for a credit check, appraisal, survey, inspection or title insurance.
For more information regarding this article visit this link to the New York Times.