Finance
The annual percentage rate (APR) on a mortgage loan is typically higher than the stated interest rate because APR:
AAccounts for compounding
BIncludes certain loan fees and costs in the rate calculation✓ Correct
CIs based on the current prime rate
DIncludes property taxes and insurance
Explanation
APR includes the interest rate plus certain loan costs (origination fees, points, mortgage insurance) expressed as an annual rate. This makes APR higher than the note rate and allows borrowers to better compare the true cost of different loan offers.
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