During a mortgage consultation, Raj notices that one lender quoted a 6.125% interest rate but a 6.34% APR on the same fixed-rate loan. What does the higher APR usually indicate?
Correct Answer
B) That the annual cost measure includes the note rate plus points and certain finance charges
APR is a broader measure of borrowing cost than the note interest rate. It generally includes the rate itself plus points and certain finance charges paid to obtain the loan, so APR is often higher than the stated rate.
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