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05-24-2011, 07:13 PM
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1 posts, read 8,513 times
Reputation: 14
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is this a good thing
apr = 5.85
fixed rate =4.75
what is the difference?
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05-24-2011, 09:44 PM
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137 posts, read 316,772 times
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The APR takes into account several costs in addition to the cost of interest on your loan. For instance, if you pay a couple thousand bucks in "discount points" up front in order to get a lower interest rate, the APR takes that couple thousand bucks, spreads it out over the period of your loan, and adds it on top of the interest (even though you paid it up front, the APR calculation pretends you are paying it annually). The point of doing these extra calculations is to give you another way of looking at the cost of your loan which might be more informative than the interest rate alone.
This article gives a pretty good overview. Here's another which has information about APY, another acronym you might come across. |
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05-25-2011, 08:19 AM
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Location: Austin, Tx
316 posts, read 800,083 times
Reputation: 201
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Notice the spread between your rate and the APR. That difference is the various fees. You are getting strung out to dry.
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05-25-2011, 09:15 AM
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Location: Austin, TX
399 posts, read 1,681,488 times
Reputation: 418
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Quote:
Originally Posted by pjoseph2
Notice the spread between your rate and the APR. That difference is the various fees. You are getting strung out to dry.
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What would be a more reasonable spread? |
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05-25-2011, 10:32 AM
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Location: Laguna Niguel, CA
768 posts, read 4,134,835 times
Reputation: 456
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Quote:
Originally Posted by JohnHenrySDM
What would be a more reasonable spread?
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... advice from a loan officer and not a consumer on what the APR should be.
There is no standard spread.
Using solely the APR to shop for a mortgage can be misleading. I recommend you compare the note rate (which is what your mortgage payment is calculated on), the terms of the loan (ARM, fixed, 20-year, 30-year, etc.), the rate lock period (10, 15, 25, 30, 45, 60 days, etc.) and the fees you are paying the broker or lender (called the "adjusted origination charge" on the good faith estimate - or if you have a fee estimate it'd be the underwriting/processing/admin/doc drawing/funding/etc. type fees towards the top of the fee estimate). |
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05-25-2011, 06:06 PM
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4,246 posts, read 11,035,769 times
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If it's more than 1/2 % look elsewhere. Unless you aren't paying a lot in closing costs.
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05-25-2011, 09:35 PM
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Location: Laguna Niguel, CA
768 posts, read 4,134,835 times
Reputation: 456
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Quote:
Originally Posted by danieloneil01
If it's more than 1/2 % look elsewhere. Unless you aren't paying a lot in closing costs.
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What are you basing that on? |
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