Finance
The annual percentage rate (APR) disclosed under TILA (Regulation Z) differs from the interest rate because the APR:
AIs always higher than the interest rate
BIncludes the effect of points, fees, and other loan costs✓ Correct
CApplies only to adjustable-rate mortgages
DIs calculated on a simple interest basis
Explanation
The APR represents the true cost of borrowing by factoring in the interest rate plus certain fees and costs (such as discount points, origination fees, and mortgage insurance). The APR is typically higher than the note rate and provides a more complete picture of loan cost.
People Also Study
Related Kentucky Questions
- The annual percentage rate (APR) on a mortgage loan is:Finance
- A buyer pays $2,250 in interest in the first month on their mortgage. What is the outstanding loan balance if the annual interest rate is 6%?Real Estate Math
- A Kentucky property owner makes monthly mortgage payments of $1,250. The annual interest rate is 6% and the loan balance is $200,000. How much of the first month's payment goes toward principal?Real Estate Math
- The annual percentage rate (APR) on a mortgage is typically higher than the stated interest rate because it includes:Finance
- A Kentucky buyer's monthly mortgage payment is $1,440. If the annual interest rate is 6% and the loan amount is $200,000, what portion of the first payment is principal?Real Estate Math
- A Kentucky property owner's mortgage payment is $1,650/month of which $1,200 is interest and $450 is principal. The loan balance is $240,000. What is the annual interest rate?Real Estate Math
- A Kentucky buyer pays 2 discount points on a $200,000 loan at a 7% rate. Each point reduces the rate by 0.25%. How much do the points cost, and what is the new rate?Finance
- Regulation Z (Truth in Lending) in Kentucky provides borrowers the right to rescind (cancel) certain mortgage transactions within:Finance
Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Math Concepts
Study This Topic
Practice More Kentucky Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Kentucky Quiz →