Finance
What is a 'note rate' versus an 'effective rate' in Kansas mortgage lending?
AThey are the same rate under federal law
BThe note rate is the contractual interest rate; the effective rate reflects any discounts, points, or fees adjusting the true yield✓ Correct
CThe effective rate is always lower than the note rate
DThe note rate includes closing costs; the effective rate excludes them
Explanation
The note rate is the stated interest rate on the promissory note. When points and fees are considered, the effective yield (actual rate paid) differs from the note rate — lenders buying mortgage pools use this distinction.
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