Finance
What is a 'note rate' versus the 'annual percentage rate' (APR) on a Delaware mortgage?
AThe note rate and APR are always the same
BThe note rate is the stated interest rate on the loan; the APR includes the note rate plus other loan costs expressed as an annual rate✓ Correct
CThe note rate includes all fees; the APR is just the base interest rate
DThe APR is used only for adjustable rate mortgages
Explanation
The note rate (contract rate) is the interest rate stated on the promissory note. The APR is a broader cost measure that includes the note rate plus other loan costs (points, fees) expressed as an annual rate, allowing apples-to-apples loan comparison.
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Key Terms to Know
Promissory Note
A written promise to repay a loan under specified terms — the borrower's personal financial obligation in a real estate transaction.
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.
Math Concepts
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