Contact Us


Annual Percentage Rate

This is also called the "Annualized Percentage Rate" or "Truth-in-Lending" or "Regulation Z".

It was started in the late seventies to keep lenders from hiding extra points and fees in the interest rates quoted. It's purpose is to give borrowers a way of comparing the costs of the same loan, at the same rate, between lenders. It is required by law that any rate quoted be accompanied by the APR for that rate. It's purpose is great. There are a few flaws in the system that you should be aware of.

Discount Points are the biggest.
Points are amortized over the life of a 30 year loan, not the actual life of the loan. The usual break-even period is between 6 - 8 years. So the APR doesn't reflect the really impact of paying thousands of dollars extra at closing when you have a high likelihood of selling or refinancing in 4 - 5 years ( national average ).

The other game that is played is that your initial APR ( to get you in the door ) is often a lot lower than the one you get at the closing table, when it's too late to change. This is something that can happen legitimately because of changes in rates or points or fees or programs. If your lender is making those changes, you have a right to be informed about them and why before you get to the closing table. Remember, until you "lock-in", your rate can change and sometimes in the processing of a loan the program needs to be changed to make it work. Far too often the "great deal" you started with isn't the one you get and it's too late to do anything but complain, if you can find anyone to complain to.

Bottom line...
If you are using the APR to compare lenders, make sure you are comparing "apples to apples" and know who you are doing business with. The story you get may not always be the real one. It's not the promise that counts; it's the reality of the delivery.


1-800-578-1555   •   801-631-9933   •   575 East 4500 South, B-170   •   Salt Lake City, Utah 84107   •   dave@udy.net