By Admin on Jun 29, 2009 in Renting & Real Estate
techzone12 asked:
I know that APR is higher than simple interest rate, becuase they add cost of borrowing, etc. What I am not sure about is, how do they calculate APR. Secondly, does a higher APR means higher montly payment? Or is it just higher upfront cost. Is the PMI included in the APR math?
I know that APR is higher than simple interest rate, becuase they add cost of borrowing, etc. What I am not sure about is, how do they calculate APR. Secondly, does a higher APR means higher montly payment? Or is it just higher upfront cost. Is the PMI included in the APR math?
Please give an example, comparing 2 different loans with same simple rate, but differnet APR. Thanks
higher APR = higher payments, yes.
APR includes PMI and other upfront costs in the computation.
an example would be too complex — try the calculators at bankrate.com
Spock (rhp) | Jun 30, 2009 | Reply
Your payment is based on the simple rate you refer to. The APR is the rate plus the costs expressed as a percentage. So, if you have lower costs on the same loan amount and rate, then your APR is lower. Your payment doesn’t change.
It changes when you lower the costs and lower the loan amount or vice-versa.
oskarmyloanguy.com | Jul 1, 2009 | Reply
It depends on what kind of loan you have. If you have an ARM (Adjustable Rate Mortgage) then the higher the APR the higher your payment will be when your rate adjusts. If you have a convential fixed rate loan, then you’re rate will stay the same through the life of your loan. Higher APR does result in higher payments. And, no PMI is not included in the APR math. PMI is a result of your principle balance.
Sorry, I don’t have time to do an example though. Hope I’ve help a bit!
Sarah K | Jul 2, 2009 | Reply