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Anonymous
Anonymous asked in Business & FinanceRenting & Real Estate · 1 decade ago

why is my apr higher than the rate!?

when i look at my paperwork i see my apr is over 1% higher than my accual interest rate why is that and is there any way to get a better apr.

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  • 1 decade ago
    Favorite Answer

    the apr shows all the fees added to the loan and the yield spread if your rate is that much higher id say your broker added to the rate to get a yield spread! (more money form bank that you wont see) they generally say thats just all the fees added not to worry about it. its total bull puckey

    what you are seeing is the differance between what you could have gotten in rate and what you ended up paying.

    now dont get me wrong some of this increase is the other fees but considering they are looking at the total anual percentage rate. those are minimal to the change the biggest is the rebate the broker charged you!

    Consider this!

    if you pay just 1% more for your home of 200k

    thats 2k a year for 30 years or 60k

    now everyone knows you pay mostly interest for the first 10 years so youll be paying off that extra 60k so the broker could make 2k.........

    doesnt seem fair but its done all the time and most borrowers are not aware they could have gotten a better deal!

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  • 1 decade ago

    APR on a fixed rate loan is ALWAYS higher than your note rate of interest.

    A few major items affect APR:

    1. Note rate - the actual rate your payments are calculated on.

    2. Closing costs - some affect APR, some don't. Ask your lender for details.

    3. Mortgage insurance. MI is factored into the APR calculation. With a 5% downpayment, MI is generally about .75%. But, it doesn't last all 30 years, more like 12 (based on standard amortization). So that could easily add maybe .4-.5% to your APR.

    I wouldn't get too bent out of shape about APR. If your note rate is good, terms are otherwise favorable, it really doesn't mean that much to you.

    Closing at the end of the month vs. the beginning will lower your APR. Which is silly, but true. Point is, it's not necessarily the most important part of your overall offer.

    Source(s): 10 years in mortgage banking
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  • Rick
    Lv 4
    1 decade ago

    When shopping for a mortgage, it is important to consider rate and costs. The APR is a way for you to shop for a loan by looking at one number. The APR is your interest rate plus any fees you may incur that you wouldn't otherwise spend if you paid cash for the house.

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  • 1 decade ago

    interest compounds on top of itself. So, if you are paying 5% on something, the actual interest rate is higher because on the next statement period you are paying interest on the interest that accrued from the previous period.

    Same thing works for savings accounts, too. If you are being paid 5%, you are actually receiving more because you will be paid interest on the interest you earned the previous period. At the end of the year since you earned interest on the interest you were paid, it comes to slightly over 5%.

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