Mortgage APR Annual Percentage Rates Explained #mortgage #broker


#mortgage apr

#

Find the LOWEST Rates Avilable Online


APR stands for Annual Percentage Rate

It is also one of the most misunderstood numbers people find when applying for loans. As consumer loans, and mortgages in particular, turned more complicated it became necessary to help regulate the way lenders advertise and notify the potential borrower of their interest rates. The attempt was to help people compare similar loans from different lenders and to explain the ultimate cost of credit. The APR is defined as the cost of credit to the borrower in relation to the amount borrowed expressed as a yearly rate. This is required by the federal Truth in Lending Act, Regulation Z.

When you apply for a mortgage the Federal Truth in Lending Disclosure form will be sent. At the top of the page you will see lots of numbers. Two of those numbers are the Note Rate (the actual rate used to calculate your monthly payments) and the Annual Percentage Rate (APR). The Annual Percentage Rate will most always be slightly higher than the note rate because the APR includes other items associated with obtaining a mortgage.

Did you need an interest rate to get a mortgage? Of course. But you also needed some other things. Origination fees, points, mortgage insurance premiums, inspections, prepaid interest and other items may also be required to obtain a mortgage. If so, these things need to be included when calculating the APR. Why is the APR useful? I’ll give you an example:

Great Big Bank offers a 30 year fixed mortgage for 8.00%. Really Small Bank offers a 30 year fixed mortgage for 7.00%. Easy choice, right? Maybe. Before lenders and mortgage brokers were required to state the APR it was hard to tell. Really Small Bank has the lowest rate (note rate) but neglected to mention a few other items. There was also 7 points, an origination fee, and mortgage insurance required. Great Big Bank had no points, no origination and just prepaid interest (your first months house payment).

On a $100,000 loan, Really Small Bank charged an additional $10,000 when compared to Great Big Bank’s fixed rate loan. You could save an additional sixty-eight bucks per month with Really Small Bank’s mortgage but you had to pay $10,000 for the privilege. The $10,000 must be included as a cost to obtain the mortgage and is reflected in the APR number.

Here’s another example: Mr. and Mrs. Smart want to buy a $85,000 home. The Developer of the project they really like has a home and offers an interest rate similar to what they could get at their Credit Union. The Developer quotes 6.00% fixed with no points. The Credit Union also quotes 6.00% with no points but had an origination fee equal to 1 percent of the loan amount (for all practical purposes an origination fee is another name for a point if it is expressed as a percentage of the loan).

BUT WAIT! The Developer failed to disclose there was a 2 percent origination fee! What looked like a better deal at the Developer’s lender turned out to be higher. If the APR’s were given, it would be evident. In this instance, the APR for the developer would be 6.24% and the Credit Union APR calculates to 6.15% due to the higher fees charged by the Developer. Even though the note rate (the rate used to figure monthly payments) was the same, it cost more at the Developer. Therefore, Mr. and Mrs. Smart (the name is more than just a coincidence) chose the mortgage from their Credit Union.

There are many other examples, but if I’ve still got your attention thus far I won’t want to lose you with boring annual percentage rate stories. Except this one.

The higher the loan amount, the less impact additional fees or points will have on the APR.
Why? If you obtain a mortgage with $2,000 of closing costs and you borrow $10,000, then the $2,000 will be nearly 20% of the loan amount. This increases the cost of your money dramatically.

Usually home equity or home improvement loans show a higher disparity between note rate and APR because of this. Likewise, if you borrow $100,000 and have $2,000 of closing costs then the fees won’t make as significant an impact on the cost of funds. The bottom line is the APR is your friend, a way to compare like mortgages.

The Fees used to calculate the APR?
There are some fees that are excluded from the calculation but below you will find fees typically included when calculating APR:

1. Origination fees
2: Points
3: Buydown funds from the buyer
4: Prepaid mortgage interest
5: Mortgage insurance premiums
6: Other lender fees (application, underwriting, tax service, etc.)

Other fees such as title insurance, appraisal and credit are not included in calculating the APR. The idea here is these other fees are not coming from the lender, and they would be charged anyway, although in the real world, this also may not be true. Like I said, we’re talking Federal Government here. Many states now have additional laws that require the lender or broker to state the APR in their advertisements beyond the requirements of the Federal Regulation. When you compare APRs, ask the lender which additional fees are included when
calculating their APR. If they don’t know the answer you may want to find a lender that does know. APRs are a way of helping the consumer determine the best loan. Get to know your new friend!


How to Calculate Annual Percentage Rate (APR) #simple #mortgage #calculator


#apr formula

#

Annual Percentage Rate (APR)

Updated July 06, 2016

Annual Percentage Rate (APR) is a tool for understanding the cost of a loan, whether it s a credit card or a mortgage. Although APR is not perfect, it gives you a nice standard for comparing interest and fees from different lenders.

What makes APR so special? It includes fees – not just interest charges – so that you can better understand the costs of a loan. To use it properly, it’s essential to understand how it works.

In many cases, your lender provides an APR, but you might need to calculate APR yourself (or you might just want to check their math).

The Value of APR

Loans can be confusing. Slick lenders quote a lot of different numbers that mean different things. They might include certain costs that you re likely to pay, or they might conveniently omit those costs in advertisements and brochures.

Sometimes you’ll get completely transparent quotes from honest lenders, but you still can’t tell which one is least expensive (because the interest rates and fees are different).

APR helps you (more or less) get an apples-to-apples comparison of loans by accounting for all of the costs related to borrowing.

If you just want an APR calculation without all of the math, use our online APR calculator .

What is APR?

APR allows you to evaluate the cost of the loan in terms of a percentage. If your loan has a 10% rate, you’ll pay $10 per $100 you borrow annually.

All other things being equal, you simply want the loan with the lowest APR.

How to Calculate APR

Calculating APR can be tricky, but there are several ways to do it:

  • Calculate with spreadsheets like Microsoft Excel
  • Calculate by hand

Either way, it’s a two-step process:

  1. Solve for the monthly payment
  2. Calculate the rate, using the payment you just calculated and your “amount financed”

Example: you will borrow $100,000 at a 7% interest rate using a 30 year fixed rate mortgage. You will pay $1,000 in closing costs. The APR is 7.10%.

With a spreadsheet (Microsoft Excel or Google Sheets), built-in functions do most of the work for you. Calculating the monthly payment is not difficult by hand, but solving for the rate is best done with a computer of some kind. You ll just need to convert the interest rate from percentage to decimal format .

Step 1: Find the monthly payment for your loan:

The format is: PMT(rate,nper,pv ,fv,type)

  • .07 divided by 12 is the rate (you’re using a monthly rate to find monthly payments)
  • 360 is the number of periods (payments or months – 30 years here)
  • 100,000 is the present value of your loan (including additional costs)

You should have a result of $665.30.

Next, Solve for the APR:

The format is: RATE(nper,pmt,pv ,fv,type,guess)

  • 360 is the number of periods you pay on the loan (360 months or 30 years)
  • – 665.30 is your payment
  • 99,000 is the present value of your loan (how much you’re actually borrowing)

You should have a result of .592%. This is still a monthly rate. Multiply by 12 to get 7.0999 APR%.

Why is the loan amount smaller in the third bullet point above? We need to calculate the rate for this step using a decreased loan balance of $99,000 (the $100,000 loan minus the $1,000 in fees required to get that loan).

Calculate APR on Payday Loans

Payday loans are notoriously expensive. These short-term loans might appear to have relatively low rates. but the fees make them problematic. Sometimes even the fees don’t seem terrible when you’re in a bind: you might gladly pay $15 to get cash quickly in an emergency. However, when you look at these costs in terms of an annual percentage rate, you’ll probably find that there are better ways to borrow.

Example: you’ll get a payday loan for $500, and you pay a fee of $50. The loan must be repaid within 14 days. What is the APR?

The Consumer Federation of America explains how to calculate the APR on a short-term payday loan:

  1. Divide the finance charge by the loan amount
  2. Multiply the result by 365
  3. Divide the result by the term of the loan
  4. Multiply the result by 100

To solve for the example above:

  1. $50 divided by $500 equals .01
  2. .01 multiplied by 365 equals 36.5
  3. 36.5 divided by 14 equals 2.6071 (this is your APR in decimal format)
  4. 2.6071 multiplied by 100 equals 260.71% APR

Finer Points

You need to know a few important things about using APR.

With credit cards. APR tells you what interest rate you pay, but it doesn’t include the effects of compounding – so you almost always pay more than the quoted APR. If you only make small (or minimum) payments on your credit card, you’ll start paying interest not only on the money you borrowed, but you’ll also pay interest on the interest that was previously charged to you. This compounding effect can raise your cost of borrowing higher than you might think. Instead of looking at the APR, APY would be a more accurate description of how much you pay. This might also be referred to as an effective annual rate.

In addition, APR for credit cards only includes interest costs – it doesn’t account for the other fees you pay to your credit card company, so you have to research and compare those costs separately. Annual fees, balance transfer fees, and other charges can add up, so a card with a slightly higher APR might be better in some cases (depending on how you use your card). In addition, your credit card might have several different APRs. so you pay different rates for different types of transactions.

Withmortgage loans. APR is complicated because it does include more than just your interest charges. Any quotes you get might or might not include closing costs that you’ll have to pay or other payments required to get your loan approved (such as private mortgage insurance ). Lenders have the ability to choose whether or not certain items are part of the APR calculation, so you have to look closely if you’re comparing loans .

You can’t simply rely on an APR quote to evaluate a loan. You need to look at each and every charge related to your loan to determine if you’re getting a good deal. If you’re comparing lenders, take note of which charges have been included in the quote.

In addition, look at the bigger picture – you need to know how long you’ll be using a loan to make the best decision. For example, one-time charges up-front may drive up your actual cost on a loan – but the APR calculation will assume those charges are spread out over a longer lifetime (and therefore the APR would look lower). If you re going to pay a loan off quickly, APR tends to underestimate the impact of up-front costs.

As you compare loans, you might hear additional terms, such as variableAPR and 0% APR. To learn more about different types of loans, see What does APR Mean?


Mortgage APR Annual Percentage Rates Explained #subprime #mortgages


#mortgage apr

#

Find the LOWEST Rates Avilable Online


APR stands for Annual Percentage Rate

It is also one of the most misunderstood numbers people find when applying for loans. As consumer loans, and mortgages in particular, turned more complicated it became necessary to help regulate the way lenders advertise and notify the potential borrower of their interest rates. The attempt was to help people compare similar loans from different lenders and to explain the ultimate cost of credit. The APR is defined as the cost of credit to the borrower in relation to the amount borrowed expressed as a yearly rate. This is required by the federal Truth in Lending Act, Regulation Z.

When you apply for a mortgage the Federal Truth in Lending Disclosure form will be sent. At the top of the page you will see lots of numbers. Two of those numbers are the Note Rate (the actual rate used to calculate your monthly payments) and the Annual Percentage Rate (APR). The Annual Percentage Rate will most always be slightly higher than the note rate because the APR includes other items associated with obtaining a mortgage.

Did you need an interest rate to get a mortgage? Of course. But you also needed some other things. Origination fees, points, mortgage insurance premiums, inspections, prepaid interest and other items may also be required to obtain a mortgage. If so, these things need to be included when calculating the APR. Why is the APR useful? I’ll give you an example:

Great Big Bank offers a 30 year fixed mortgage for 8.00%. Really Small Bank offers a 30 year fixed mortgage for 7.00%. Easy choice, right? Maybe. Before lenders and mortgage brokers were required to state the APR it was hard to tell. Really Small Bank has the lowest rate (note rate) but neglected to mention a few other items. There was also 7 points, an origination fee, and mortgage insurance required. Great Big Bank had no points, no origination and just prepaid interest (your first months house payment).

On a $100,000 loan, Really Small Bank charged an additional $10,000 when compared to Great Big Bank’s fixed rate loan. You could save an additional sixty-eight bucks per month with Really Small Bank’s mortgage but you had to pay $10,000 for the privilege. The $10,000 must be included as a cost to obtain the mortgage and is reflected in the APR number.

Here’s another example: Mr. and Mrs. Smart want to buy a $85,000 home. The Developer of the project they really like has a home and offers an interest rate similar to what they could get at their Credit Union. The Developer quotes 6.00% fixed with no points. The Credit Union also quotes 6.00% with no points but had an origination fee equal to 1 percent of the loan amount (for all practical purposes an origination fee is another name for a point if it is expressed as a percentage of the loan).

BUT WAIT! The Developer failed to disclose there was a 2 percent origination fee! What looked like a better deal at the Developer’s lender turned out to be higher. If the APR’s were given, it would be evident. In this instance, the APR for the developer would be 6.24% and the Credit Union APR calculates to 6.15% due to the higher fees charged by the Developer. Even though the note rate (the rate used to figure monthly payments) was the same, it cost more at the Developer. Therefore, Mr. and Mrs. Smart (the name is more than just a coincidence) chose the mortgage from their Credit Union.

There are many other examples, but if I’ve still got your attention thus far I won’t want to lose you with boring annual percentage rate stories. Except this one.

The higher the loan amount, the less impact additional fees or points will have on the APR.
Why? If you obtain a mortgage with $2,000 of closing costs and you borrow $10,000, then the $2,000 will be nearly 20% of the loan amount. This increases the cost of your money dramatically.

Usually home equity or home improvement loans show a higher disparity between note rate and APR because of this. Likewise, if you borrow $100,000 and have $2,000 of closing costs then the fees won’t make as significant an impact on the cost of funds. The bottom line is the APR is your friend, a way to compare like mortgages.

The Fees used to calculate the APR?
There are some fees that are excluded from the calculation but below you will find fees typically included when calculating APR:

1. Origination fees
2: Points
3: Buydown funds from the buyer
4: Prepaid mortgage interest
5: Mortgage insurance premiums
6: Other lender fees (application, underwriting, tax service, etc.)

Other fees such as title insurance, appraisal and credit are not included in calculating the APR. The idea here is these other fees are not coming from the lender, and they would be charged anyway, although in the real world, this also may not be true. Like I said, we’re talking Federal Government here. Many states now have additional laws that require the lender or broker to state the APR in their advertisements beyond the requirements of the Federal Regulation. When you compare APRs, ask the lender which additional fees are included when
calculating their APR. If they don’t know the answer you may want to find a lender that does know. APRs are a way of helping the consumer determine the best loan. Get to know your new friend!


Motorhome hire excess insurance #campervan #hire #insurance,excess #liability #cover, #insurance4motorhomerental, #motorhome #excess #insurance, #motor #home,


#

Have you thought about taking out motorhome | campervan hire excess insurance?

Insure the excess on your motorhome hire with a daily insurance policy

The excess liability motorhome insurance if bought directly from a motorhome hire company is often very expensive. This is ideal for renting a motorhome for a holiday abroad or in the UK.

When you rent a motorhome / campervan are you aware that the Excess can cost more than the vehicle? Motorhome hire excess insurance is a great way to save money and have peace of mind when you rent a motorhome / campervan.

Do you know that it could cost you a lot of money for any damage to your motorhome rental vehicle? EVEN IF IT’S NOT YOUR FAULT!

For a low daily premium a motorhome hire excess insurance company can provide excess insurance protecting the customer against excess charges whenever he / she rents a motorhome.

When you rent a motorhome, you will find that your motorhome rental agreement normally includes cover for Collision Damage Waiver – CDW (damage to the rental vehicle) and Theft. There is almost always an excess on the Collision Damage Waiver and Theft.

You are however still liable for the Excess on CDW and Theft.

When a motorhome / camper van is damaged or stolen, the driver is asked to pay the first portion of the repair or replacement costs. This is known as the Excess.

Motorhome hire excess insurance policies can be purchased by people resident anywhere in the world (however you should check with individual insurance providers for their terms and condition s)

Click on a logo below for more information from providers below advertising motorhome hire excess insurance on this site

Excess is also known as, non-waiver, the deductible or super CDW . Excess is a voluntary insurance and is sold by car rental companies at the counter when the customer collects the car (or when the booking is made). It is usually charged on a Daily basis and applies to Car hire . Van hireand Motorhome hire

The customer has the right to accept or decline the car rental company’s Excess. If they do decline, they will be responsible for the excess charges if they have any damage to the vehicle. In some cases the car hire company will not let the hirer take delivery of the car unless they take out the excess.

The cost of the Excess will vary according to:

  • The rental company
  • Size of the rental vehicle
  • The country in which the car is picked-up

You can take out a daily policy, annual policy, a family policy and customers up to the age of 84 can be covered.

When you buy your car hire insurance from a specialist you will save �’s – �’s – $’s compared to the cost of buying the cover when you pick up your motorhome or book the motorhome hire from a mototorhome rental company.

Remove your motorhome hire excess now

Motor home excess Insurance Providers below

Questor insurance services Car Hire Excess – Motorhome – Minibus Hire Excess – Car club Van Hire Excess Insurance

They also offer

Car hire excess insurance

Van hire excess insurance

Minibus hire excess insurance

Car Club hire excess insurance

Motorcycle hire excess insurance

Please note that none of the insurance companies currently advertising on this site appear to offer motorcycle hire excess insurance either in the UK or overseas. If you are looking for Motorcyle or Scooter insurance find out more Here

If you are in the Self Drive Motorhome Hire business and are looking for insurance for your hire vehicle fleet – find out more about INSURE CARHIRE .co.uk HERE – Also Van Hire and Car Hire

Looking for Motorhome / Campervan/ Caravan insurance for your own personal vehicle?

Click on the logo below

Tips for motorhome users

Know the height of your vehicle. There low bridges, car park entrances that a 4X4 would fit under, but the extra height on the motorhome means these ar no go areas.You will find yourself looking for large open carparks that will allow you to enter and exit easily.

Secure all your belongings in the vehicle. You don’t want some of your belongings joining you at the front of the vehicle whilst you are speeding along the motorway.

Don’t take too much with you. The more you carry in the way of food, drink and belongings (including large containers of dog food if you are taking your dog) the heavier the fuel consumption of the vehicle.

Do not to belt along -50/65 mph (80/105 km/h) appears to be both economic on the fuel and easier for emergency braking (remember there is 3.0/3.5 tonnes to stop!).

Keep the external dimensions of your vehicle to hand (such as behind the sun visor). Remember the extra length of the vehicle when turning.

One advantage of driving a motorhome is that you have very good visibility over most other traffic.

Reversing – Many motoromes have a camera to assist reversing, some drivers find that even with a camera to assist it is still tricky but the more you do it the more experienced you should become.

If you go and put your bike/s in a cover on the back of the motorhome, you might find that view from the camera is blocked.

Wedges – when you park on a slope, make sure that wedges are put behind the vehicle’s rear wheels. If there are none provided, use some brick or large stones.

If you have any tips, please contact us with them Here

Apollo Motorhome Holidays has joined forces with Hertz – February 2011

Questor for motorhome hire insurance – February 2011

Camper Van Hire Camper Van Hire Classics – September 2010

insurance4carrental.com website is marketing motorhome excess insurance – July 10

Media / Press Releases HERE

Motorhome hire excess insurance policies can be purchased by people resident anywhere in the world?

So if you live in the UK, Ireland, France, Germany, USA, South Africa, Cyprus,Sweden, The Netherlands, Spain, Japan, New Zealand or Canada and other countries, you should be able to buy car hire insurance from one the insurance companies advertising on this site.

You should of course check with individual insurance providers for their terms and conditions. Find out more Here

jml Group Blogspot sites – read our blogs and add your comments to:

Guides on driving abroadClick on an area below


Employee Performance – Talent Management Software #employee #performance #appraisals, #performance #appraisal #software, #performance #appraisal #system,


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An unmatched customer experience

Learn how to transform your talent management programs


Best UK Equity and Bond Funds #oeics, #unit #trusts, #fund #prices, #oeic #closing #prices, #fund


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Welcome to Morningstar.co.uk!

You have been redirected here from Hemscott.com as we are merging our websites to provide you with a one-stop shop for all your investment research needs.

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Registered Hemscott users can log in to Morningstar using the same login details. Similarly, if you are a Hemscott Premium user, you now have a Morningstar Premium account which you can access using the same login details.

Morningstar.co.uk contains data, news and research on shares and funds, unique commentary and independent Morningstar research on a broad range of investment products, and portfolio and asset allocation tools to help make better investing decisions.

For more information:

  • Find out more about Morningstar and the website
  • Read our top tips for getting the most out of Morningstar.co.uk
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Don’t show me this message again

Welcome to Morningstar.co.uk!

You have been redirected here from Hemscott.com as we are merging our websites to provide you with a one-stop shop for all your investment research needs.

Get Started: To search for a security, type the name or ticker in the search box at the top of the page and select from the dropdown results.

Registered Hemscott users can log in to Morningstar using the same login details. Similarly, if you are a Hemscott Premium user, you now have a Morningstar Premium account which you can access using the same login details.

Morningstar.co.uk contains data, news and research on shares and funds, unique commentary and independent Morningstar research on a broad range of investment products, and portfolio and asset allocation tools to help make better investing decisions.

For more information:

  • Find out more about Morningstar and the website
  • Read our top tips for getting the most out of Morningstar.co.uk
  • Locate your usual Hemscott.com features on Morningstar.co.uk
  • See a comprehensive list of Morningstar.co.uk features
  • Check the answers to FAQs
  • Contact website support

Don’t show me this message again


How to Calculate Annual Percentage Rate (APR) #mortgage #quote


#apr formula

#

Annual Percentage Rate (APR)

Updated July 06, 2016

Annual Percentage Rate (APR) is a tool for understanding the cost of a loan, whether it s a credit card or a mortgage. Although APR is not perfect, it gives you a nice standard for comparing interest and fees from different lenders.

What makes APR so special? It includes fees – not just interest charges – so that you can better understand the costs of a loan. To use it properly, it’s essential to understand how it works.

In many cases, your lender provides an APR, but you might need to calculate APR yourself (or you might just want to check their math).

The Value of APR

Loans can be confusing. Slick lenders quote a lot of different numbers that mean different things. They might include certain costs that you re likely to pay, or they might conveniently omit those costs in advertisements and brochures.

Sometimes you’ll get completely transparent quotes from honest lenders, but you still can’t tell which one is least expensive (because the interest rates and fees are different).

APR helps you (more or less) get an apples-to-apples comparison of loans by accounting for all of the costs related to borrowing.

If you just want an APR calculation without all of the math, use our online APR calculator .

What is APR?

APR allows you to evaluate the cost of the loan in terms of a percentage. If your loan has a 10% rate, you’ll pay $10 per $100 you borrow annually.

All other things being equal, you simply want the loan with the lowest APR.

How to Calculate APR

Calculating APR can be tricky, but there are several ways to do it:

  • Calculate with spreadsheets like Microsoft Excel
  • Calculate by hand

Either way, it’s a two-step process:

  1. Solve for the monthly payment
  2. Calculate the rate, using the payment you just calculated and your “amount financed”

Example: you will borrow $100,000 at a 7% interest rate using a 30 year fixed rate mortgage. You will pay $1,000 in closing costs. The APR is 7.10%.

With a spreadsheet (Microsoft Excel or Google Sheets), built-in functions do most of the work for you. Calculating the monthly payment is not difficult by hand, but solving for the rate is best done with a computer of some kind. You ll just need to convert the interest rate from percentage to decimal format .

Step 1: Find the monthly payment for your loan:

The format is: PMT(rate,nper,pv ,fv,type)

  • .07 divided by 12 is the rate (you’re using a monthly rate to find monthly payments)
  • 360 is the number of periods (payments or months – 30 years here)
  • 100,000 is the present value of your loan (including additional costs)

You should have a result of $665.30.

Next, Solve for the APR:

The format is: RATE(nper,pmt,pv ,fv,type,guess)

  • 360 is the number of periods you pay on the loan (360 months or 30 years)
  • – 665.30 is your payment
  • 99,000 is the present value of your loan (how much you’re actually borrowing)

You should have a result of .592%. This is still a monthly rate. Multiply by 12 to get 7.0999 APR%.

Why is the loan amount smaller in the third bullet point above? We need to calculate the rate for this step using a decreased loan balance of $99,000 (the $100,000 loan minus the $1,000 in fees required to get that loan).

Calculate APR on Payday Loans

Payday loans are notoriously expensive. These short-term loans might appear to have relatively low rates. but the fees make them problematic. Sometimes even the fees don’t seem terrible when you’re in a bind: you might gladly pay $15 to get cash quickly in an emergency. However, when you look at these costs in terms of an annual percentage rate, you’ll probably find that there are better ways to borrow.

Example: you’ll get a payday loan for $500, and you pay a fee of $50. The loan must be repaid within 14 days. What is the APR?

The Consumer Federation of America explains how to calculate the APR on a short-term payday loan:

  1. Divide the finance charge by the loan amount
  2. Multiply the result by 365
  3. Divide the result by the term of the loan
  4. Multiply the result by 100

To solve for the example above:

  1. $50 divided by $500 equals .01
  2. .01 multiplied by 365 equals 36.5
  3. 36.5 divided by 14 equals 2.6071 (this is your APR in decimal format)
  4. 2.6071 multiplied by 100 equals 260.71% APR

Finer Points

You need to know a few important things about using APR.

With credit cards. APR tells you what interest rate you pay, but it doesn’t include the effects of compounding – so you almost always pay more than the quoted APR. If you only make small (or minimum) payments on your credit card, you’ll start paying interest not only on the money you borrowed, but you’ll also pay interest on the interest that was previously charged to you. This compounding effect can raise your cost of borrowing higher than you might think. Instead of looking at the APR, APY would be a more accurate description of how much you pay. This might also be referred to as an effective annual rate.

In addition, APR for credit cards only includes interest costs – it doesn’t account for the other fees you pay to your credit card company, so you have to research and compare those costs separately. Annual fees, balance transfer fees, and other charges can add up, so a card with a slightly higher APR might be better in some cases (depending on how you use your card). In addition, your credit card might have several different APRs. so you pay different rates for different types of transactions.

Withmortgage loans. APR is complicated because it does include more than just your interest charges. Any quotes you get might or might not include closing costs that you’ll have to pay or other payments required to get your loan approved (such as private mortgage insurance ). Lenders have the ability to choose whether or not certain items are part of the APR calculation, so you have to look closely if you’re comparing loans .

You can’t simply rely on an APR quote to evaluate a loan. You need to look at each and every charge related to your loan to determine if you’re getting a good deal. If you’re comparing lenders, take note of which charges have been included in the quote.

In addition, look at the bigger picture – you need to know how long you’ll be using a loan to make the best decision. For example, one-time charges up-front may drive up your actual cost on a loan – but the APR calculation will assume those charges are spread out over a longer lifetime (and therefore the APR would look lower). If you re going to pay a loan off quickly, APR tends to underestimate the impact of up-front costs.

As you compare loans, you might hear additional terms, such as variableAPR and 0% APR. To learn more about different types of loans, see What does APR Mean?


How to Calculate Annual Percentage Rate (APR) #best #mortgage #companies


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Annual Percentage Rate (APR)

Updated July 06, 2016

Annual Percentage Rate (APR) is a tool for understanding the cost of a loan, whether it s a credit card or a mortgage. Although APR is not perfect, it gives you a nice standard for comparing interest and fees from different lenders.

What makes APR so special? It includes fees – not just interest charges – so that you can better understand the costs of a loan. To use it properly, it’s essential to understand how it works.

In many cases, your lender provides an APR, but you might need to calculate APR yourself (or you might just want to check their math).

The Value of APR

Loans can be confusing. Slick lenders quote a lot of different numbers that mean different things. They might include certain costs that you re likely to pay, or they might conveniently omit those costs in advertisements and brochures.

Sometimes you’ll get completely transparent quotes from honest lenders, but you still can’t tell which one is least expensive (because the interest rates and fees are different).

APR helps you (more or less) get an apples-to-apples comparison of loans by accounting for all of the costs related to borrowing.

If you just want an APR calculation without all of the math, use our online APR calculator .

What is APR?

APR allows you to evaluate the cost of the loan in terms of a percentage. If your loan has a 10% rate, you’ll pay $10 per $100 you borrow annually.

All other things being equal, you simply want the loan with the lowest APR.

How to Calculate APR

Calculating APR can be tricky, but there are several ways to do it:

  • Calculate with spreadsheets like Microsoft Excel
  • Calculate by hand

Either way, it’s a two-step process:

  1. Solve for the monthly payment
  2. Calculate the rate, using the payment you just calculated and your “amount financed”

Example: you will borrow $100,000 at a 7% interest rate using a 30 year fixed rate mortgage. You will pay $1,000 in closing costs. The APR is 7.10%.

With a spreadsheet (Microsoft Excel or Google Sheets), built-in functions do most of the work for you. Calculating the monthly payment is not difficult by hand, but solving for the rate is best done with a computer of some kind. You ll just need to convert the interest rate from percentage to decimal format .

Step 1: Find the monthly payment for your loan:

The format is: PMT(rate,nper,pv ,fv,type)

  • .07 divided by 12 is the rate (you’re using a monthly rate to find monthly payments)
  • 360 is the number of periods (payments or months – 30 years here)
  • 100,000 is the present value of your loan (including additional costs)

You should have a result of $665.30.

Next, Solve for the APR:

The format is: RATE(nper,pmt,pv ,fv,type,guess)

  • 360 is the number of periods you pay on the loan (360 months or 30 years)
  • – 665.30 is your payment
  • 99,000 is the present value of your loan (how much you’re actually borrowing)

You should have a result of .592%. This is still a monthly rate. Multiply by 12 to get 7.0999 APR%.

Why is the loan amount smaller in the third bullet point above? We need to calculate the rate for this step using a decreased loan balance of $99,000 (the $100,000 loan minus the $1,000 in fees required to get that loan).

Calculate APR on Payday Loans

Payday loans are notoriously expensive. These short-term loans might appear to have relatively low rates. but the fees make them problematic. Sometimes even the fees don’t seem terrible when you’re in a bind: you might gladly pay $15 to get cash quickly in an emergency. However, when you look at these costs in terms of an annual percentage rate, you’ll probably find that there are better ways to borrow.

Example: you’ll get a payday loan for $500, and you pay a fee of $50. The loan must be repaid within 14 days. What is the APR?

The Consumer Federation of America explains how to calculate the APR on a short-term payday loan:

  1. Divide the finance charge by the loan amount
  2. Multiply the result by 365
  3. Divide the result by the term of the loan
  4. Multiply the result by 100

To solve for the example above:

  1. $50 divided by $500 equals .01
  2. .01 multiplied by 365 equals 36.5
  3. 36.5 divided by 14 equals 2.6071 (this is your APR in decimal format)
  4. 2.6071 multiplied by 100 equals 260.71% APR

Finer Points

You need to know a few important things about using APR.

With credit cards. APR tells you what interest rate you pay, but it doesn’t include the effects of compounding – so you almost always pay more than the quoted APR. If you only make small (or minimum) payments on your credit card, you’ll start paying interest not only on the money you borrowed, but you’ll also pay interest on the interest that was previously charged to you. This compounding effect can raise your cost of borrowing higher than you might think. Instead of looking at the APR, APY would be a more accurate description of how much you pay. This might also be referred to as an effective annual rate.

In addition, APR for credit cards only includes interest costs – it doesn’t account for the other fees you pay to your credit card company, so you have to research and compare those costs separately. Annual fees, balance transfer fees, and other charges can add up, so a card with a slightly higher APR might be better in some cases (depending on how you use your card). In addition, your credit card might have several different APRs. so you pay different rates for different types of transactions.

Withmortgage loans. APR is complicated because it does include more than just your interest charges. Any quotes you get might or might not include closing costs that you’ll have to pay or other payments required to get your loan approved (such as private mortgage insurance ). Lenders have the ability to choose whether or not certain items are part of the APR calculation, so you have to look closely if you’re comparing loans .

You can’t simply rely on an APR quote to evaluate a loan. You need to look at each and every charge related to your loan to determine if you’re getting a good deal. If you’re comparing lenders, take note of which charges have been included in the quote.

In addition, look at the bigger picture – you need to know how long you’ll be using a loan to make the best decision. For example, one-time charges up-front may drive up your actual cost on a loan – but the APR calculation will assume those charges are spread out over a longer lifetime (and therefore the APR would look lower). If you re going to pay a loan off quickly, APR tends to underestimate the impact of up-front costs.

As you compare loans, you might hear additional terms, such as variableAPR and 0% APR. To learn more about different types of loans, see What does APR Mean?


Mortgage APR Annual Percentage Rates Explained #mortgage #solutions


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Find the LOWEST Rates Avilable Online


APR stands for Annual Percentage Rate

It is also one of the most misunderstood numbers people find when applying for loans. As consumer loans, and mortgages in particular, turned more complicated it became necessary to help regulate the way lenders advertise and notify the potential borrower of their interest rates. The attempt was to help people compare similar loans from different lenders and to explain the ultimate cost of credit. The APR is defined as the cost of credit to the borrower in relation to the amount borrowed expressed as a yearly rate. This is required by the federal Truth in Lending Act, Regulation Z.

When you apply for a mortgage the Federal Truth in Lending Disclosure form will be sent. At the top of the page you will see lots of numbers. Two of those numbers are the Note Rate (the actual rate used to calculate your monthly payments) and the Annual Percentage Rate (APR). The Annual Percentage Rate will most always be slightly higher than the note rate because the APR includes other items associated with obtaining a mortgage.

Did you need an interest rate to get a mortgage? Of course. But you also needed some other things. Origination fees, points, mortgage insurance premiums, inspections, prepaid interest and other items may also be required to obtain a mortgage. If so, these things need to be included when calculating the APR. Why is the APR useful? I’ll give you an example:

Great Big Bank offers a 30 year fixed mortgage for 8.00%. Really Small Bank offers a 30 year fixed mortgage for 7.00%. Easy choice, right? Maybe. Before lenders and mortgage brokers were required to state the APR it was hard to tell. Really Small Bank has the lowest rate (note rate) but neglected to mention a few other items. There was also 7 points, an origination fee, and mortgage insurance required. Great Big Bank had no points, no origination and just prepaid interest (your first months house payment).

On a $100,000 loan, Really Small Bank charged an additional $10,000 when compared to Great Big Bank’s fixed rate loan. You could save an additional sixty-eight bucks per month with Really Small Bank’s mortgage but you had to pay $10,000 for the privilege. The $10,000 must be included as a cost to obtain the mortgage and is reflected in the APR number.

Here’s another example: Mr. and Mrs. Smart want to buy a $85,000 home. The Developer of the project they really like has a home and offers an interest rate similar to what they could get at their Credit Union. The Developer quotes 6.00% fixed with no points. The Credit Union also quotes 6.00% with no points but had an origination fee equal to 1 percent of the loan amount (for all practical purposes an origination fee is another name for a point if it is expressed as a percentage of the loan).

BUT WAIT! The Developer failed to disclose there was a 2 percent origination fee! What looked like a better deal at the Developer’s lender turned out to be higher. If the APR’s were given, it would be evident. In this instance, the APR for the developer would be 6.24% and the Credit Union APR calculates to 6.15% due to the higher fees charged by the Developer. Even though the note rate (the rate used to figure monthly payments) was the same, it cost more at the Developer. Therefore, Mr. and Mrs. Smart (the name is more than just a coincidence) chose the mortgage from their Credit Union.

There are many other examples, but if I’ve still got your attention thus far I won’t want to lose you with boring annual percentage rate stories. Except this one.

The higher the loan amount, the less impact additional fees or points will have on the APR.
Why? If you obtain a mortgage with $2,000 of closing costs and you borrow $10,000, then the $2,000 will be nearly 20% of the loan amount. This increases the cost of your money dramatically.

Usually home equity or home improvement loans show a higher disparity between note rate and APR because of this. Likewise, if you borrow $100,000 and have $2,000 of closing costs then the fees won’t make as significant an impact on the cost of funds. The bottom line is the APR is your friend, a way to compare like mortgages.

The Fees used to calculate the APR?
There are some fees that are excluded from the calculation but below you will find fees typically included when calculating APR:

1. Origination fees
2: Points
3: Buydown funds from the buyer
4: Prepaid mortgage interest
5: Mortgage insurance premiums
6: Other lender fees (application, underwriting, tax service, etc.)

Other fees such as title insurance, appraisal and credit are not included in calculating the APR. The idea here is these other fees are not coming from the lender, and they would be charged anyway, although in the real world, this also may not be true. Like I said, we’re talking Federal Government here. Many states now have additional laws that require the lender or broker to state the APR in their advertisements beyond the requirements of the Federal Regulation. When you compare APRs, ask the lender which additional fees are included when
calculating their APR. If they don’t know the answer you may want to find a lender that does know. APRs are a way of helping the consumer determine the best loan. Get to know your new friend!


Annual Percentage Rate (APR) calculator – EndMemo #american #mortgage


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Annual Percentage Rate (APR) Calculator

A nnual P ercentage R ate (APR) is the equivalent interest rate of a loan including all loan fees and interests payed. The monthly payment is calculated using following formula:

Where:
P: Monthly payment
C: Initial loan amount
E: All loan fees
r: Interest rate (%)
N: Pay terms

The total amount payed (T) is:
T = P * N + F

The total interest payed (I) is:
I = P * N – C – E

The direct-ratio APR formula is:
a = 6M * B/(3C(N+1) + B(N+1))

The constant-ratio formula is:
a = 2M * B /(C(N+1))

The N-ratio formula is:
a = M(95N + 9) * B/(12N(N+1)(4C + B))

Where:
a: APR
M: Number of payments per year
B: Total finance charges
F: Closing Fees

APR calculation Example:
A $300,000 loan with $4,000 other fees and an annual interest rate 5%, the payback term is 10 years.
The monthly payment = (300000 + 4000) * 0.05 * (1 + 0.05) 120 / ((1 + 0.05) 120 – 1) = 3224.39
The total payment = 3224.39 * 120 = 386927
The total interest = 386927 – 300000 = 86927
The Direct-ratio APR is 5.241%.
The Constant-ratio APR is 5.747%.
The N-ratio APR is 5.307%.

Note: The most frequently used method by the lender is the actuarial method, while the formula for which is complicated due to the loan structure.