Author Topic: Mortgage Refi, quick interest rate question.  (Read 2562 times)

Dynasty

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Mortgage Refi, quick interest rate question.
« on: February 06, 2013, 07:23:24 PM »
All, working on a no fee mortgage refinance.

I've been quoted at 3.625% no fee. I forget what the interest was on the other option where I pay closing costs and an appraisal. But there was a seven or eight year break even point..

Back on topic. On the Federal Truth in Lending Disclosure statement, one of the big boxes on top is showing an APR of 3.728%. However, everywhere else in the application and pages of disclosures it is saying 3.625%..

What does this mean?


secondcor521

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Re: Mortgage Refi, quick interest rate question.
« Reply #1 on: February 06, 2013, 10:59:58 PM »
The higher APR is calculated based on a relatively standardized formula specified by the government.  It includes certain closing costs and makes certain assumptions about the rate at which you repay the loan.  It's higher than your nominal rate of 3.625% because of the additional closing costs that it includes in the calculation.

The intent of this APR is to enable the consumer to compare loans on an "apples-to-apples" basis, although I've read that mortgage lenders do what they can to make this number appear as low as possible while still getting you to pay as much in fees and interest as they can.

I've seen spreads (between the nominal rate and the truth in lending APR) far higher than 1/10th of a percentage point, so from that limited point of view the number is reasonable.  As always, shop around and do your own due diligence.

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Greg C

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Re: Mortgage Refi, quick interest rate question.
« Reply #2 on: March 25, 2015, 12:38:53 PM »
That spread will be much different depending on the size of the loan.  Depending on the state you live in, most are relatively standard showing roughly $2300-3000 in closing costs on average considering a zero point loan, although some states are more expensive because of higher title fees, appraisal costs, surveys and state taxes.  New York and Florida come to mind as high-cost mortgage states.  If your balance is smaller, you'll see a higher spread between rate and APR because the fixed costs to finance are larger in proportion to your balance.  With a larger loan amount this spread will be smaller and you'll have more opportunity to offset your costs with negative points, which will reduce or eliminate the costs ("no-cost" loan is done by giving a rate higher than what you qualify for).  I know your topic is from a long time ago, which likely means this is long over, but do you know where your costs landed?  BE of 7 yrs is a long time on refi, but 3.625% on a 30 yr fixed is pretty damn slick.