Finance
What is the 'annual percentage rate' (APR) and how is it used by Delaware borrowers?
AThe simple interest rate stated on the mortgage note
BThe total cost of borrowing expressed as an annual percentage — including the stated interest rate plus fees and charges — allowing borrowers to compare the true cost of different loan offers✓ Correct
CThe annual rate of property appreciation in a given Delaware market
DThe maximum interest rate allowed by Delaware usury law
Explanation
APR is the annual cost of borrowing expressed as a percentage, including the stated interest rate plus all applicable fees (origination fees, points, mortgage insurance, etc.).
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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