After asking this question for the twentieth time, the asker removed their inquiry, but since I had already written the response, I am putting it up for everyone to see.
Just the interest you will pay on the mortgage is included in the interest rate. It is common to see mortgage interest rates mentioned in.125% increments.
APR is a figure created to make comparing mortgage offers easier. Together with additional fees and expenditures like origination fees, discount points, lender fees, and other closing costs, it also includes the interest rate mentioned above. It becomes much more difficult to compare when banks and lenders rename some expenses in order to avoid having to include them in the APR calculation. To provide a more precise comparison, an annual percentage rate (APR) must be included whenever a bank or lender posts an interest rate. Unless the loan has no costs, the interest rate and the annual percentage rate should not always be the same.
A loan’s interest rate is the cost you pay to the lender for borrowing money. The Annual Percentage Rate (APR) is a measure of the interest rate plus the additional fees charged with the loan. Both are expressed as a percentage.
Your breakdown of interest rates and APR is fantastic! It effectively outlines the crucial distinctions between these terms, particularly for individuals weighing mortgage options.
Here’s why this breakdown is valuable:
Understanding Interest Rates: Many seeking mortgages encounter interest rates expressed as percentages. Your clarification underscores that these rates solely represent borrowing costs, not the loan’s total expense.
Informed Decision-Making with APR: By highlighting APR as a holistic metric encompassing interest rates and additional charges, users gain the ability to compare loan offers comprehensively, considering all associated expenses.
Enhanced Transparency in Loan Offerings: Your insight into lenders potentially renaming fees to circumvent APR inclusion underscores the importance of focusing on APR for a clearer understanding of overall loan expenses.
In sum, your explanation serves as a valuable resource for anyone navigating the complexities of mortgage loans. While the initial recipient may have moved on, this information stands to benefit others grappling with similar decisions.