*USING THE EXAMPLE CHART ABOVE
30yr $100,000 mortgage loan at 6.25% note interest rate with $1200 fees and closing cost. The APR is 6.3633%
Explanation:
The amount borrowed is $100,000 for a 30yr term with closing cost of $1200. The monthly payment on principle and interest is computed using the loan amount of $100,000 at 6.25% rate.
The APR is computed using a note rate of 6.25%, $100,000 loan amount PLUS the $1200 closing cost fee. Therefore, the APR looks at the loan amount as $101,200 because that is the amount borrowed plus the cost of borrowing that money.
If the amount borrowed was $100,000 at 6.25% on a 30 yr fixed term but the closing cost and fees were $3000 the APR would be 6.5332%
If the amount borrowed was $100,000 at 6.25% on a 30 yr fixed term but the closing cost and fees were $500 the APR would be 6.2972%
Both APR and Note Rate are expressed in a %.
TIP about APR: There tends to be no industry standards in computing APR'S so many loan APR'S are disclosed using different closing fees. Some include all the fee's others include very minimal fee's. This may be intentional or unintentional by the lender.
It may be hard for lenders to disclose the actual APR without an application an a property address. Since, (in theory) the APR should include all fees like property/transfer tax, title fees, escrows an more, without a property an a application the lender can hardly know these fees when stating a rate. APR EXAMPLE CHART
