What is a Mortgage APR?

Mortgage APR definition, how is APR established?

As a home buyer, you’re likely going to obtain a home mortgage.  Many of us look at the interest rates for a mortgage and compare them to find the lowest cost mortgage.  However, mortgage interest rates do not take into account the entire cost of a home loan.  When buying a home, you’ll have costs beyond just the home sale price that may not be accounted for in the purchase process.  These upfront costs are then spread out over the course of the mortgage term and added to the interest to provide your mortgage APR.  These are some of those fees that likely get spread out across the term of the loan to impact the APR:

  • Application Fee
  • Amortization Schedule Fee
  • Assignment Fee
  • Assumption Fee
  • Attorney Fees (May only be a portion of it)
  • Commitment Fee
  • Couriers
  • Discount Points
  • Escrow Waiver
  • Flood Certification
  • Funding Fee
  • Inspections
  • Interest Adjustment
  • Mortgage Broker Fees
  • Origination Fee
  • Private Mortgage Insurance
  • Processing Fee
  • Settlement/Closing Fee
  • Tax Service Fee
  • Underwriting Fee
  • Wiring Fees

Not all of these fees will apply to each loan.  Many of these costs are very similar across products.  However, when a loan company claims that you have “no upfront costs” be wary and look at the mortgage APR along with the fee details.  You might find that you are actually paying a hefty price for this convenience. If you’d like to schedule a time to discuss APRs, feel free to contact me, your Mortgage Genie, as I make each family’s home dream come true one wish at a time.

Karen Douglas