Real Estate Mortgage Loans

 Real Estate APR

A mortgage is the largest and most complicated loan you will receive, therefore it is important that you understand all the costs and mortgage terms so you can make an informed decision. APR (Annual Percentage Rate) was developed to help you understand the relative cost of a mortgage transaction. It is therefore useful to use when comparing similar loans.

APR was enacted by a federal law, The Truth-in-Lending Act. This requires creditors to provide information about the conditions, terms, and costs of a loan. This law is administered under a Federal Reserve Board regulation known as Regulation Z.

APR is a measure of the total cost of a mortgage loan. It is expressed as a yearly interest rate. A complicated mathematical formula, as outlined in Regulation Z, is used to calculate the APR. Basically, it reflects the amount being financed, the interest rate, the timing of the payments, and any other prepaid charges required as a condition of the mortgage loan which make up the finance charge. The finance charge is a sum of the costs associated with the mortgage. It includes interest and other payments required of the borrower such as points, origination fees, application fees, and insurance. By adding the fees and costs to the mortgage loan amount, the effective APR is usually higher than the actual interest rate on the mortgage loan.

The APR is an artificial measurement of the relative cost of your mortgage. It is not the actual interest rate you pay on the mortgage loan. The actual interest rate is a part of the APR calculation.

The APR allows you to compare different mortgage loans and the relative cost of each loan. It should not be the only factor you should consider before making a decision. You need to consider other factors such as the interest rate and the required fees or charges. A lower APR does not necessarily ensure that it is the best mortgage.

We can help you understand all of the costs associated with obtaining your mortgage loan. We can calculate the APRs of other loan programs to assist you in your decision. Our goal is to help you find the right mortgage for the purchase or refinance of your home.

If you are interested in applying for a loan from the Farmers & Merchants Bank & Trust, please stop in, telephone, or e-mail us a request using our Contact Us page.