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Old 08-18-2010, 01:36 PM
 
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I'm confused with interest rate and APR. When calculating your monthly mortage, did you use the interest rate number or the APR number? Thank you for your inputs.
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Old 08-18-2010, 02:53 PM
 
Location: Austin
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You calculate mortgage payments with your interest rate. Your APR is what your first year's rate would be if you didn't pay the costs for the loan like origination fee, underwriting fee, processing fee, etc... The APR should be very close to your actual interest rate or you're paying way too many fees (unless you purposely bought down your rate to make it lower).
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Old 08-18-2010, 03:54 PM
 
123 posts, read 514,566 times
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If I pay my closing cost up front, then I calcuate my 15 year monthly mortgage based on the interest rate? So I don't have to worry about APR then?
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Old 08-18-2010, 04:43 PM
 
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Default Backwards!

The APR is your important number! If the quoted rate is nit very close to the APR be extra cautious that there is no "teaser period" in there to depress things or a fist full of junk fees to inflate things. The APR spreads all the upfront fees or discounts over the LIFE of the loan. If you do not plan on hanging on to that for it's entire term you really need a detailed break out of what is part of the calculation...
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Old 08-18-2010, 07:05 PM
 
Location: MID ATLANTIC
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Quote:
Originally Posted by destiny826 View Post
If I pay my closing cost up front, then I calcuate my 15 year monthly mortgage based on the interest rate? So I don't have to worry about APR then?
Use your interest rate to calculate your payment.

The APR was designed as an easy (hahahaha) method for the consumer to comparison shop. If lender A offered 3.75% and 3 points and lender B offered 4.125% with no points, which is the better deal? Answer: the one with the lower APR. Other than comparison shopping, the APR is used to make sure lenders are meeting federal disclosure laws.

The Truth In Lending disclosure really had great intentions, but it was another one of those forms with poor execution. I tried to upload a copy of a great step-by-step explanation, but the CD site wouldn't let me upload it in two different places on the site. The explanation of the APR can be found in respone #2 at this thread: Offer accepted by bank....Chase vs Wells Fargo Mortgage Loan
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