Interest Rate vs APR
You are most likely to encounter low mortgage interest rates and low annual percentage rates (A.P.R.) on television commercials or newspaper ads as lenders vie for the attention of potential borrowers looking for the lowest mortgage rates. This is just a tactic for them to get you to call so they can explain why you don’t qualify for the advertised mortgage interest rate and proceed to sell you on a higher interest rate with higher fees. So remember the old adage “Buyer Beware”.
A.P.R. was created to provide a way for borrowers to account for costs associated with the mortgage loan. This sounds good because it may not be very easy to choose between a mortgage loan with a lower mortgage interest rate and higher fees or a mortgage loan at a higher mortgage interest rate with low fees. Although APR is supposed to be a shopping tool, its an inaccurate tool at best. While it’s designed to make it easier to compare mortgage loans, it’s sometimes confusing because the A.P.R. includes some, but not all, of the various fees and mortgage insurance premiums that accompany a mortgage loan. And since the federal law that requires mortgage lenders to disclose the A.P.R. does not clearly define what goes into the calculation at the time of this article, A.P.R.s can vary from mortgage lender to mortgage lender and from mortgage loan to mortgage loan.
