Finance
Under the Massachusetts Consumer Credit Cost Disclosure Act, lenders must disclose the Annual Percentage Rate (APR). The APR is higher than the note rate because:
AMassachusetts adds a state surcharge to all mortgage rates
BThe APR includes the interest rate plus certain fees and costs expressed as an annual rate✓ Correct
CThe APR is calculated on the original loan amount without amortization
DThe APR reflects the lender's profit margin
Explanation
The APR is a broader measure of loan cost that includes the interest rate plus fees (points, origination fees, etc.) spread over the loan term, expressed as a percentage.
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Key Terms to Know
Amortization
The 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.
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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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