![]() Therefore, the higher the fees, and the shorter the term, the higher the APR. This is because you pay the fees and other charges up-front and over the shorter term, their impact on the APR is more significant. For example, if you plan to sell the property before the loan's term is reached, then the calculated APR is not the actual APR. Or for any loan term.īut your circumstances will likely vary. Remember I said the APR is a "personal number?" If you are taking out a 30-year mortgage, the mathematics behind the APR assumes that you'll be paying off the loan for the entire 30 years. Why's that? When given a choice, why would I ever want to take out a loan with a higher APR? You do not necessarily want to take the loan with the lowest APR. There's another caveat the borrower should be aware of when comparing APRs. 2 - A Regulation Z Compliant APR Calculation. (I stress required charges because if you opt into a charge, say an enhanced septic tank inspection that the lender does not require, then that charge is not accounted for in the APR calculation.) Fig.
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