Why does a mortgage loan have two numbers associated with it (ex: 2.99% / 3.29% APR)? Which number is more important to me as the borrower?
In your example, the 2.99% would represent the "Interest Rate" while the 3.29% represents the "Annual Percentage Rate". It's not really a question of which number is "more important" but it's about understanding what each number represents and how that influences your decision on what mortgage is right for you. The interest rate is the annual cost of the loan (what you borrowed) that gets paid to the lender as profit for lending you the money. The annual percentage rate is the same thing...the annual cost of the loan...except this percentage also includes all of the fees & charges that get paid as part of the loan process & closing.
Hope that helps! | 03.03.15 @ 19:31
Hello, As Chad stated, those two numbers are the interest rate and the APR, which is a measure of the interest you pay based on the amount you end up getting (so subtracting off some of the loan costs since you don't get those funds). APRs are not always great indicators on "whether a loan makes sense". For instance, low loan sizes result in much higher gaps between interest rate and APR's for those loans. Since larger loan sizes typically don't result in proportionately higher closing costs, the interest rate/APR gap on those is smaller. Another factor to consider is that APR calculations don't factor in lender credits, which are credits lenders give to borrowers to offset costs, based on the rate of their loans. For instance, if I do a refinance with $2500 in closing costs, but give a lender credit of $2500, my borrower essentially incurred no costs (although the rate might have been .125% higher or so, depending on loan parameters.) The APR, however, doesn't take the lender credit into account, which is misleading since the credit offset the costs.
Hope these details help, if not, feel free to contact me through my profile, I write loans nationally, and use lender credits to cover closing costs for my borrowers when appropriate to their individual situations. Thanks, Ted | 06.01.16 @ 03:38