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Why Is The APR So Much Higher Than My Mortgage Interest Rate?

By Stacy Williams

The APR also known as Annual Percentage Rate always tends to be higher as compared to the mortgage interest rates due to a number of reasons. But it is important to note that the APR is never used to calculate the mortgage interest rate to be charged When calculating the APR, there are a number of items that are included that are normally excluded when calculating ones mortgage interest rates. Below we take a look at some of these factors and try to explain why they are added to the Annual Percentage rate rather than the mortgage interest rate.

Included Aspects That The Mortgage Interest Rate Don’t Put Into Consideration

When calculating the Annual Percentage Rate, there are a number of figured that are normally included thus making the final result to be higher than the average mortgage interest rate. The figures added to the APR include those obtained from the any mortgage insurance that one is liable to pay, additional lenders fees, discounts that are to be paid on loans and any pre paid interests. This figures when added to the original interest rate will give a higher result.

Payment Procedure For APR And Mortgage Interest Rate

The annual percentage rate will tend to be higher since it is used to determine the total annual cost of the mortgage loan that ones takes. Since it is used to establish the overall cost, it takes into considerations any and every expense made when granting the mortgage loan. For example the lenders fees and any discount fees. The APR is normally paid in annual basis. On the other hand, the mortgage interest rate only takes into considerations what is only payable on monthly basis and that is the rate of the loan as set by the lenders.

Related posts:

1. What Factors Determine The Annual Percentage Rate For A Mortgage Rate?
2. Why Do APR Payments Go Up When Interest Rates Go Down?
3. Do APR Payments Go Up When Interest Rates Go Down?
4. Do I Pay A Higher Interest Rate On A Fixed Rate Mortgage?
5. How Is The Annual Percentage Rate Determined For A Mortgage Rate?