How does a house loan for 5.99% fixed, wind up being 6.44% a year?How does this work?
Mortgages are based on a rate (5.99%). and that is what they advertise. The 6.44% is the APR which factors in all the associated fees to get into the loan. Snakey stuff.
It's a way to hide fees.How does this work?
Your note rate is 5.99%. The APR is the total cost of acquiring the loan. It is not dishonest in the least. The only way the APR would match the note rate is if there were absolutely no costs involved with acquring the loan, ie no appraisal, origination, ecrow fee, ect. Those costs are fair costs and exist in EVERY SINGLE LOAN TRANSACTION. The actual interest you are paying on the principal amount is 5.99. The other fees, if paid out of pocket, are not affecting your monthly payment on the property. APR is disclosed in order to allow the borrower to objectively compare loan offers with differing rates and fees by expressing them as one number via a standard calcuation. That way you know FOR SURE who is giving you the best deal.
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