September 6, 2019
Autumn leaves will be falling soon, but what’s falling now are interest rates. The Summit’s Mortgage Team has been extra busy helping people take out mortgages or refinance existing ones. Of course, they answer a lot of questions. We thought we’d explain one of the most common: What’s the difference between an APR and an interest rate?
The Interest Rate is the annual cost of borrowing for a specific length of time, expressed as a percentage of the principal, which is the amount borrowed. Different lenders can charge different interest rates, and a lender can have separate interest rates for each loan type it offers.
APR (“Annual Percentage Rate”) is the yearly cost of borrowing, including associated fees and charges such as closing costs, mortgage insurance and loan origination fees. It is the annual interest cost of the total debt.
While the interest rate is important to know, the APR gives the borrower a more complete picture of what he or she will be paying, since the fees are included in the APR’s calculation. All lenders are required to give the borrower this information as part of the Federal Truth in Lending Act. Therefore, the APR is a good place to start when comparing what is offered at one financial institution versus another.
Have more questions? Contact our Mortgage Team at (585) 453-7010 or (800) 836-7328 extension 7010.
Membership Eligibility Required. The Summit is an Equal Housing Lender.
Cynthia Kolko, The Summit Federal Credit Union