Posted by Charm_AL on 6/9/05 3:53pm
Msg #43590

I thought I was seeing things

I had 4 dignings yesterday and in two of them the APR was lower than the fixed interest rate. Pretty unusual, don't you think?

Reply by Dave_CA on 6/9/05 3:55pm
Msg #43591

I think it is exceedingly strange. I'll be very interested to see what others have to say.

Reply by TN Notary on 6/9/05 3:56pm
Msg #43594

I had one of those not too long ago.

Reply by CrystalT_FL on 6/9/05 5:18pm
Msg #43607

I've seen it with HFC loans, they have a "rate reduction" program where the rate decreases each year with good payments. Therefore a lower APR

Reply by SamIam_CA on 6/9/05 5:55pm
Msg #43618

Very interesting! Just curious - do you happen to know/remember if the initial interest seemed a little high or if their credit scores seemed a little low?

Reply by Sylvia_FL on 6/9/05 6:06pm
Msg #43625

I have done several of these lately. They are negative interest refis. Payments are lower earlier on, but they increase over the life of the loan.

Paul can explain it better than me, so I will let him

Reply by PAW_Fl on 6/9/05 8:41pm
Msg #43666

For **Fixed Rate Mortgages**, the APR will be ^^higher^^ than the note rate because the APR is calculated in a way to reflect the true annual cost of borrowing, including points and closing costs. Consumers can use the APR to make accurate comparisons of rates between two offers without any hidden costs or fees.

For **Adjustable Rate Mortgages**, a fully-indexed APR is used that is based on a comparison that is made at each adjustment date of the 'then current' rate plus 2% versus the margin plus the index. As part of this calculation, the index is assumed to remain constant throughout the life of the loan. When the underlying indexes are low, it is possible for the fully-indexed APR to be lower than the starting rate on the loan. During the past year the APR was considerably lower than the note rate on most ARM products.

Reply by missy_socal on 6/9/05 9:42pm
Msg #43685

Interesting! I had one recently, and I wondered if it was a mistake! The borr. had questions anyway, so I didn't hear the LO's response about the APR/Note interest issue.