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Why is the APR on an ARM lower than the actual interest rate?

adonis · Posted: Wed Apr 23, 2008 9:26 pm Post subject:

Welcome Kbrat,

I'm quite surprized at the APR being lower than the interest rate becuse usually it is higher as it includes the loan costs as well as the interest rate at which you pay your mortgage. It's actually the effective rate implying the total costs of the loan including the closing costs as well as the interest you pay.

gmakerley · Posted: Thu Apr 24, 2008 6:03 am Post subject:

i agree - apr ought to be higher than the quoted rate in every case. you'd best go back to the lender and ask for another good faith estimate - there appears to be something quite wrong with what they've quoted you.

securityonefinancial · Joined: 19 Jun 2008 Posts: 5 10.83 Dollars($)

I agree with George, ask for a good faith estimate. Some companies underquote to "get you in" but might later increase.

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chrisburns · Posted: Fri Jun 20, 2008 10:06 am Post subject:

I can't see a situation where that would be the case.

brian1 · Posted: Fri Jun 20, 2008 8:53 pm Post subject:

I have heard of this and it usually has to do with the current index plus margin being below the rate being sold. It can happen but I have never seen it. Ask the person that generated it. If they have a reason and can explain it fill us in.....

Brian

banker0679 · Posted: Sat Jun 21, 2008 7:54 pm Post subject:

It happened in the last months
The 1 Year LIBOR Rate jumped from 2.48625 to 3.164.
If you use the index 2.486 for the rate of 5.5%, you will clearly see that the APR is lower.

brian1 · Posted: Sun Jun 22, 2008 6:54 pm Post subject:

If I remember right it happened a few years ago when the Libor was really low as well.
It isnt a bad thing.just rare

Brian

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