cancel
Showing results for 
Search instead for 
Did you mean: 

Rate vs APR?

tag
Anonymous
Not applicable

Rate vs APR?

I'm puzzled by the differnces in these 2 CUs offers for a ARM and would appreciate clarification:

 

1) rate 3.00 APR .3.07

2) rate 2.87 APR 3.125

 

Why is the disparity much higher on #2,?

Message 1 of 5
4 REPLIES 4
StartingOver10
Moderator Emerita

Re: Rate vs APR?


@Anonymous wrote:

I'm puzzled by the differnces in these 2 CUs offers for a ARM and would appreciate clarification:

 

1) rate 3.00 APR .3.07

2) rate 2.87 APR 3.125

 

Why is the disparity much higher on #2,?


APR takes into account your closing costs so their fees are slightly higher at closing but you have a much better interest rate. This is why you have to compare both the note rate and the APR.  If you are going to be in the property for a long time, you want the lower rate but you need to check the other items too on an adjustable mortgage. 

 

With an adjustable mortgage you need to check the index and the margin.  Once you know these factors: note rate, APR, margin, index and adjustment terms then you can make a decision on the best ARM for you.

Message 2 of 5
Anonymous
Not applicable

Re: Rate vs APR?

Uhhh, thanks for the reply, now I need an interpreter ;-)

Message 3 of 5
StartingOver10
Moderator Emerita

Re: Rate vs APR?

I'm sorry Smiley Embarassed

 

Here is a pretty good explanation of the terms and a link to the various indexes that are commonly used in ARM mortgages.  Your LO should be able to show you the terms and explain the best and worst case senarios  

 

http://www.mtgprofessor.com/A%20-%20ARMs/how_arms_work_simplified.htm

 

Here is a little bit easier explanation of the terms used in an ARM:  http://www.bankrate.com/finance/mortgages/learn-the-basics-of-a-7-1-arm.aspx

Message 4 of 5
Anonymous
Not applicable

Re: Rate vs APR?

Thanks again, I'll give them a gander

Message 5 of 5
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.