why is it on a mortgage loan with 6.15% rate and 0 points, the apr is 6.33? Shouldnt the rate and apr be same?

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  1. Reply
    April 30, 2011 at 1:22 am

    no because they charge you every month. the yield is what you will wind up paying over the year due to compounding

  2. Reply
    April 30, 2011 at 1:53 am

    There were other closing cost not points but loan fees and other fees like to pull a credit report.

  3. Reply
    April 30, 2011 at 2:21 am

    Well, not really.
    Points aren’t the only cost that you pay on a refinance. Check for processing fees, underwriting fees, credit report fees, doc prep fees, etc…. any fees that you pay to get the loan are going to be included in your APR, not just points.
    If you have no points then your true APR and the note rate will be really close, which you have at 6.15 and 6.33, but you still have to pay something to get the credit.

  4. Reply
    April 30, 2011 at 2:40 am

    The APR also rolls in costs that you would not pay if you bought the house with cash. The lender may not be charging you points. However, they could be charging you a $ 2,000 Underwriting Fee. They could call it whatever they want, instead of points.

  5. Reply
    April 30, 2011 at 2:46 am

    6.15% would be the simple rate. However, the APR takes into account not only the interest rate, but also the effect of compounding, and fees.

    Compounding is the effect of how interest rates are calculated on a loan – which means how often the interest rate is applied. If a loan is calculated annually – 12% will be 12%. However most loans are calculated monthly and a very few daily. Calculating and applying interest charges more frequently means the EFFECTIVE interest rate is slightly higher, then if it is only applied once a year.

    Second, there are often points and certain lenders fees that are a part of the loan. The APR generally reflects at least some of those costs.

    A lot of lenders like to focus on the interest rate, and not the APR. However, the APR is the number you want to look at when you compare different lenders.

    For instance,

    Lender A may offer a percentage rate of 6.91%, with an APR of 7.12%

    Lender B has an interest rate of 6.98% and an APR of 7.09%.

    Although Lender B’s percentage rate is higher, the overall structure of the loan and the costs of the loan iare cheaper with Lender B’s offering.

    Hope this helps.

  6. Reply
    Cinthia P
    April 30, 2011 at 3:19 am

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