Not all mortgage shoppers benefit from APR

Costs vary for borrowers seeking short-term loans

What is the APR? The APR, or annual percentage rate, is a measure of the cost of credit that includes loan fees paid to the lender upfront, as well as the interest rate. The higher the loan fees, the larger the APR will be relative to the rate. What is the purpose of the APR? To provide a single comprehensive measure of the cost of credit to borrowers, which they can use to compare loans of different types and features and loans offered by different loan providers. The APR is a mandated disclosure under Truth in Lending. Mortgage shoppers confront it as soon as they search for interest-rate quotes because the law requires that any rate quote must also show the APR. Can all borrowers rely safely on the APR? No, some should ignore the APR, including: Borrowers who expect that they will sell their house or refinance the mortgage within seven years. Borrowers looking to raise cash, who are comparing the cost of a cash-out refinancing with the cost of a second mortgage. Borrowers w...