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What is the difference between the interest rate and the A.P.R.? St Louis Interest Rate Update

The A.P.R. is a tool for comparing different loans, which will include different interest rates but also different points and other terms. The A.P.R. is designed to represent the “true cost of a loan” to the borrower, expressed in the form of a yearly rate. This way, lenders can’t “hide” fees and upfront costs behind low advertised rates.

While it’s designed to make it easier to compare loans, it’s sometimes confusing because the A.P.R. includes some, but not all, of the various fees and insurance premiums that accompany a mortgage. And since the federal law that requires lenders to disclose the A.P.R. does not clearly define what goes into the calculation, the A.P.R. can vary from lender to lender and loan to loan.

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The A.P.R. on a loan tied to a market index, like a 5/1 ARM, assumes the market index will never change. But ARMs were invented because the market index changes and makes fixed rate loans cheaper or more expensive to make — that’s why they’re variable rate in the first placed!

Note when you’re browsing for loan terms that the A.P.R. will not tell you about balloon payments or prepayment penalties, or how long your rate is locked. Also, you’ll see that the A.P.R. on 15-year loans will carry a higher relative rate due to the fact that points are amortized over a shorter period of time.

So, the A.P.R. at best inexact. The lesson is, that A.P.R. can be a guide, but you need a mortgage professional to help you find the truly best loan for you.

St. Louis MORTGAGE INTEREST RATES for October 31, 2012:

  • Conventional 30-Year Fixed 3.500%/ 3.777% APR
  • Conventional 15-Year Fixed 2.875%/ 2.972% APR
  • Conventional 7/1 ARM 2.625%/ 3.332% APR
  • FHA/VA 30 Year Fixed 3.25%/4.160% APR
  • Jumbo 5/1 ARM  2.625%/ 2.426% APR
  • Jumbo 15 yr Fixed 3.000%/ 3.094% APR
  • Jumbo 30 yr Fixed 4.625%/ 4.719% APR

*The above mortgage rates are based upon an 80% LTV, o/o single family with FICO scores of 720.

Paramount Mortgage is a locally owned Mortgage Banker celebrating our 41st year. Great rates and programs are secondary to what is most desired in a lender relationship: Integrity, Communication and Customer Satisfaction. Be to check out our website: www.paramountmortgage.com

For more information or if you have questions on mortgage rates you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.

 

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