A number of clients have asked me about why the APR (annual percentage rate) differs from the Note Rate (the interest rate on the mortgage loan). The APR is an artificial rate that combines the interest rate on the loan with any loan fees. So, if you are paying fees for the loan, the APR will be higher than the Note Rate.

The APR helps you see if a “too-good-to-be-true” low rate you are offered comes with fees, which might offset the benefits of that great rate.

However, sometimes it makes sense to pay higher costs to get a lower rate. If you plan to stay in your home for many years, over time (normally 4-7 years) the lower rate will have paid you back for the upfront costs and after that you will enjoy the lower rate savings.

Figuring out the best combination of rate and cost can be complicated. Give me a call if you have questions about current rates and costs. I’ll spell out your options and help you determine the best loan for your particular situation.