Author Topic: Why would a loan with a higher interest rate have a lowe APR?  (Read 1873 times)

nFriedly

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I'm looking at the 10- and 15- year loans on http://www.mycumortgagehomeloans.com/rates.asp?siteId=540F06FF-D3B1-44FD-8285-6C9FFD0ACD47

MortgageRateAPR
10 Year Fixed 2.625% 3.234%
15 Year Fixed 2.750% 3.169%

I thought APR would rise with the interest rate, so what's going on here?
« Last Edit: May 20, 2013, 11:00:50 AM by nFriedly »

Undecided

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Re: Why would a loan with a higher interest rate have a lowe APR?
« Reply #1 on: May 20, 2013, 11:52:09 AM »
APR does rise with the interest rate, but it also rises with whichever fees are included in the applicable calculation of APR. So the higher APR loan must have higher origination charges or processing fees or something like that.

clutchy

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Re: Why would a loan with a higher interest rate have a lowe APR?
« Reply #2 on: May 21, 2013, 05:28:30 PM »
The APR is the adjusted rate you'll be paying after you consider the fees it will be costing you. 

So it's important to look at that.

If the Interest rate and the APR aren't the same it should set off an ALARM that somewhere something may not be what it appears.  Especially if they are trying to pawn it off as a no fee loan. 

The last loan I got the APR was actually less than the interest rate... helicopter money i suppose.

Nords

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Re: Why would a loan with a higher interest rate have a lowe APR?
« Reply #3 on: May 21, 2013, 06:50:39 PM »
MortgageRateAPR
10 Year Fixed 2.625% 3.234%
15 Year Fixed 2.750% 3.169%
I thought APR would rise with the interest rate, so what's going on here?
I'd have to check my math with the dollar numbers, not just the percentages, but I bet the fixed closing costs spread across the 10-year loan raise the APR more than the fixed closing costs when they're amortized over the 15-year loan.

You might get an even better APR on a 30-year loan!