In California real estate financing, what is the difference between the interest rate and the annual percentage rate (APR) on a deed of trust loan?
Correct Answer
B) The APR includes the interest rate plus certain fees and costs, making it typically higher than the stated rate
The APR, required under TILA, incorporates the stated interest rate plus certain finance charges (such as discount points, origination fees, and mortgage insurance) to provide a more comprehensive measure of borrowing cost. The APR is typically higher than the stated note rate.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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