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Truth-In-Lending snapshot

More commonly called APR, Annual Percentage Rate is a government-mandated mortgage comparison tool. It measures the total cost of borrowing over the life of a loan into dollars-and-cents.

A loan’s APR is printed in the top-left corner of the Federal Truth-In-Lending Disclosure, as shown above. When quoting an interest rate, loan officers are required by law to disclose a loan’s APR, too.

APR is meant to simplify the process of choosing between two or more loans. The theory is that the loan with the lowest APR is the “best deal” for the applicant because the loan’s long-term costs are lowest. However, the loan with the lowest APR isn’t always best.

APR makes assumptions in its formula that can render it moot.

First, APR assumes you’ll pay your mortgage off at term, at never sooner. So, if your loan is a 15-year fixed rate, its APR is based on a full 15 year term. If you sell or refinance prior to Year 15, the math used to make your loan’s APR becomes instantly flawed and “wrong”.

Example: Let’s compare two identical loans in Florida — one with discount points and a lower interest rate; and one without discount points and a higher mortgage rate. The loan with discount points will have a lower APR in most cases. However, if the homeowner sells or refinances within the first few years, the loan with the higher APR would have been the better option, in hindsight.

Second, APR can be “doctored” early in the loan process.

Because the APR formula accounts for third-party costs in a mortgage transaction, and third-party costs aren’t always known at the start of a loan, a bank can inadvertently understate them. This would make the APR appear lower than what it really is, and may mislead a consumer.

And, lastly, APR is particurly unhelpful for adjustable-rate loans. Because the APR calculation makes assumptions about how a loan will adjust during its 30-year term, if two lenders use a different set of assumptions, their APRs will differ — even if the loans are identical in every other way. The lender whose adjustments are most aggressively-low will present the lowest APR.

Summarized, APR is not the metric for comparing mortgages — it’s metric. For relevant comparison points, talk to your loan officer.

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CENTURY 21 East Lake Realty
782 East Lake Road
Palm Harbor, FL 34685
Phone: 727 784-6040
www.century21eastlake.com
Email: sales@c21elr.com

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I think the world of Melissa as my realtor. She was so understanding and thorough. I had sold previous properties, but never had a better performance from any realtor as I did with Melissa. She spends a super amount of time with her client. She also listens to your requests and goes the extra length to find you what you want for the price you want. I not only got a condo in this deal, I found a new friend. Alli n all Melissa is outstanding person. I could go on forever, but as a realtor , she's tops in my book. I had the best experience ever with this real estate office I think Melissa deserves a front parking space and a party for being a superior realtor.. She helps Century 21 get referrals from me. Helen
Ginger was a wonderful real estate agent! I cannot put into words how outstanding Ginger is, this was an emotional process for me and she was there for me every stop of the way. From beginning to end she was a true professional with a complete understanding of the real estate market. She goes beyond the extra mile for her clients - she is truly one in a million! I would recommend her to all my friends and family! Melissa
Karen was extremely knowledgeable and professional. She knows how to strategize for the client and how to make it all work out of to your advantage, Would absolutely use her again. Did the close from Dallas and it went perfectly. We first had to renovate before selling. Project took about a month. Michelle in maintenance was extremely competent and I did not have to be there. Century 21 also handles our rental properties. Their services are outstanding! Deb and Dave
I believe Sandy Harris was excellent in all regards, She offered good advice on how to respond to offers from several potential buyers and successfully manged the negotiations with the eventual buyer. Once a deal was in place, Sandy also managed addressing the issues that arose in the porperty inspection, She made the whole transaction efficient and easy for me as a long-distance seller. Thank you Sandy!
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