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Old 11-15-2008, 11:28 PM
Location: Denver
3,139 posts, read 6,903,098 times
Reputation: 2907


I thought the problem with APR is that there is no "standardized" way to calculate apr. As in what fees and such is rolled into the apr calculation. There for it was a poor way to judge the value of a mortgage.

The best way was to look at the actual rate and then look at the fees yourself.
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Old 11-18-2008, 08:53 PM
55 posts, read 243,277 times
Reputation: 46
Hi Antonini,

That difference between your interest rate and APR seems really huge!

We closed last month on our home (30-yr fixed) with a rate of 5.25% and APR of 5.64%
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Old 11-19-2008, 03:14 PM
Location: Laguna Niguel, CA
768 posts, read 3,958,169 times
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PMI plays a factor in the APR, increases it by quite a bit. That is why FHA loans can have APR's ~1% higher than the actual note rate. There is the UFMIP + the monthly MI.
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Old 11-21-2008, 07:38 PM
Location: Escondido, CA
1,504 posts, read 5,330,292 times
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Interest rate: 5.875%
+ PMI: 1.09% ($151.01 * 12 / $166250)
+ 0.625 points: eff. 0.06%
+ $2755 closing costs: eff. 0.19%
APR 7.19%

So the bulk of your APR-interest gap comes from PMI, which seems to be too high. There's something else missing, because, to get from APR 7.19% to 7.38%, there must be around $3000 in other up-front fees hidden somewhere.
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Old 02-08-2009, 03:17 PM
11 posts, read 13,393 times
Reputation: 11
Pretty solid explanation of APR and inside mortgage info

at Annual Percentage Rate (APR)

and an easy online APR calc - don't use ,'s you'll get an error http://banking.about.com/library/cal...lator_load.htm

hope this helps
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Old 02-09-2009, 08:19 AM
4,542 posts, read 11,544,610 times
Reputation: 3063
Originally Posted by f_m View Post
Here is Wells Fargo rates. The APR is only slightly higher than the interest rate. I would only expect it to be about 1/4% or so higher.

What if you are paying PMI??
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Old 05-13-2009, 05:15 PM
Location: Maryland
3 posts, read 19,560 times
Reputation: 22
Easy Way To Determine APR

There is a simple way to calculate the Annual Percentage Rate that I discovered when I first started out as a Loan Officer, because I did not have a software program to calculate it for me at the time- (I did not even have a computer or fax).

The annual percentage rate is not as complex as some think.

The purpose of APR is to bring clarity through disclosure, not confusion.
There is a way to figure out the problem of APR by using the Newton Raphson Method,
but there is a much easier way.

The APR is simply a vehicle through which the lender is required, by the federal
government, to translate costs associated with a given loan being considered..FOR EXAMPLE:

If the amount that you are borrowing is $100,000.00 @6.00% for 30 years, you will
have a payment of $599.55 P+I every month for 360 months.
If $3,000.00 within this loan amount is for the purpose of prepaid finance charges (fees) associated with origination, then your net loan amount is actually $97,000.00
At $97,000.00 loan amount (if you are using a rate of 6%), you would naturally calculate a lesser payment because of the reduced loan amount.

All you have to do to figure out the APR, is figure out what % rate you would need
to obtain that same payment of $599.55 at a loan amount of $97,000.00.

The rate you would need would be 6.2865% to produce this payment. (example).
This is your APR.

All it takes is a calculator and a little patience to narrow it down.
At this point, you are armed with the knowledge you need to determine the closing
costs on your mortgage quote accurately.

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