Fixed Rate APRs

Although it might appear that the APR would apply accurately to fixed-rate mortgages, that is true only in the unlikely event you pay off the loan balance precisely according to its schedule over the full life of the loan. If you pay ahead of (or behind) schedule, your actual APR will increase. Similarly, if you sell your house or refinance your mortgage, your actual APR will exceed the APR figure the government requires lenders to calculate. Likewise, as with ARMs, lenders omit some expenses from their APR—even though the lender will require you to pay them.

APR disclosures aim to fulfill a real need: to help consumers compare the total costs of mortgage loans. In practice, you must look beyond the APR. To obtain the best loan at the lowest cost, compare loan products according to your financial situation, your tolerance for risk and the expected period over which you plan to hold your loan (see Secret #24).

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